What Are My Digital Payment Options?

Given the current economic state of our nation, and with so many individuals transitioning to remote work, it’s becoming increasingly valuable to take a critical eye at your company’s current operations.

 

Case in point? How your company pays your workforce.

 

Being in the belly of advancing technology, much like we are today, means it’s becoming far less common to see a physical paycheck. Although these forms of payment still do functionally exist, the pendulum of employee pay has swung in a direction that highlights digital payment options, like direct deposits and pay cards.

 

What is a paycard?

A paycard, or payroll card, is akin to a prepaid MasterCard or debit card. Each payday, an employee’s earned wages are loaded onto the paycard. The employee can then use this card like a debit card and can effectively withdraw funds at either an ATM, bank teller, or an establishment in which cashback can be issued.

 

According to a 2017 study by the FDIC, 25% of households in the United States were either unbanked or underbanked. Being either unbanked or underbanked indicates that a household either has no bank account or does not have enough money to maintain an account. 

 

One of the large draws to a company paying its employees via paycard is that an employee isn’t required to have a bank account. Many individuals in the hospitality industry, for example, expect to take home tips at the end of the day to supplement their base pay rate. However, not all customers pay with cash, and oftentimes add tips to a bill by way of plastic (credit card or debit card). These tips are often then paid out as a normal wage on the employee’s following paycheck.

 

Paycards are the perfect solution for immediate payout of workers’ tips on a daily basis, and can be used immediately once funded.

 

A few pros of utilizing paycards:

  • Reloadable, which can save on costs most often associated with paper checks.
  • Available to all employees regardless of whether or not they have a bank account.
  • Usually distributed by conventional card companies like MasterCard and Visa.

 

A couple of cons linked to paycards:

  • Fees can accumulate for the employee (ATM fees, replacement fees, inactivity fees, balance inquiry fees, etc.). 
  • Inability to extract an entire paycheck. Most ATMs and establishments that allow a cash back option only disperse cash in round numbers. This can prevent an employee from drafting their full wage amount.

 

What is direct deposit?

what-is-direct-depost

Direct deposit is an electronic payment that occurs from one bank account to another, most often between an employer and an employee. 

 

Direct deposits have seen exponential growth primarily due to its effective elimination of paper checks. So much so that as of 2013, the United States’ Social Security Administration eliminated printed checks, only permitting the transfer of funds to happen electronically. 

 

A few pros to direct deposit:

  • Automated deposits allow employees to receive instant payment and can mitigate paying fees that might be a result of late payments.
  • Less paper waste.
  • Fewer labor costs associated with handing out paychecks means saving more money for the business.

 

A couple of cons to direct deposit:

  • Payments are automatically deducted regardless of whether or not your company has funds.
  • The employer has direct access to an employee’s personal bank account information. (However, it’s also important to add that while this can be an arguable con for employees, there are solutions in place, like FastPay’s secure onboarding platform.)

 

When considering whether or not to make the switch from a paper check to a payroll card or direct deposit, make sure to review the laws and regulations within your state, along with the pros and cons of each. 

 

Visit our blog to learn more about the Evolution of the Pay: Do You Remember Paper Checks?

 

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