by Mark Smith
Vice President of Client Services
PayStar Financial
Paycards are bank debit cards that are
linked directly to payroll deposits. These specialized
debit cards can be restricted or enhanced, depending on
the vendor. Paycards fall into three basic classes. First,
there are branded paycards – Visa / MasterCard.
These paycards are issued by Visa / MasterCard partner
banks. Each bank has their own process and fee schedule.
These paycards are also called “signature” cards
because they can be used without a PIN. Second, there
are vendor branded bank account paycards. These paycards
are issued under specific vendor logos. Each paycard is
a true FDIC insured bank account that has restrictions,
such as no personal checks. The paycard processes are
established by the vendor as are the fees. All transactions
are PIN verified. Third, there are vendor branded, stored
value paycards. These paycards are issued under specific
vendor logos, with their own processes and fee schedules.
All transactions are PIN verified. These paycards accounts
are sub accounts of a master bank account that is owned
by the employer or a third party. Individual paycard accounts
are not FDIC insured.
Paycards are becoming popular for many reasons. There are changes
going on within the economy that make the move from paper checks
to electronic payment more compelling each day. There are many
changes within the banking business that make it harder for employees
to get payroll checks cashed. Fraudulent payroll checks are increasing
and represent a large expense to banks. Banks respond by making
it more difficult to get a payroll check cashed. More and more
banks are moving to charge a fee to cash a payroll check.
Merchants are recognizing that they can achieve significant
savings by accepting electronic payments (credit or debit) rather
than checks. Merchants receive credit immediately and do not
have the expense of preparing a deposit or paying a bank to process
their deposit. Merchants greatly prefer PIN based debit cards
because they can frequently process that transaction at a lower
fee. Merchants frequently give cash back with PIN based debit
cards because again they lower their cost of depositing cash
and they get credit to their account immediately. Each week merchants
are installing the hardware, which is a key pad, to permit them
to accept PIN based debit cards.
Employers are looking for ways to be able to improve the reliability
of payroll delivery and save money on payroll distribution. By
offering paycards or paycards in conjunction with direct deposit,
employers can greatly reduce or eliminate paper check printing
and distribution.
Paycards allow employers to offer electronic
payment to all employees. Paycards can be issued without any
approval, which
means there is universal acceptance. Paycards are simple to use
so the training process is not complex. Employees can use their
paycards to make withdrawals at ATM’s, make purchases at
participating merchants or use some of the special paycard features
such as bank drafts or ACH transfers. Paycards are safer than
checks or cash, which employees like. The fees that are associated
with paycard transactions are often less than employees pay in
monthly bank account service charges or for check cashing fees.
Based on volume, paycards can be a low or no cost expense to
employers, which means that all of the check printing, distribution
and overhead cost become true savings to the company. Paycard
funding can be done using standard ACH transmission, so no system
modifications are required to implement. Paycard enrollment is
recorded in payroll systems as though they are standard direct
deposit records – bank routing code, account number and
checking account.
About the Author
Mark Smith joined PayStar early in 2002, after doing private
paycard consulting. He had previously worked for Sears, Roebuck
and Co as Payroll Manager. At Sears Mark was responsible for
paycard vendor review and selection as Sears chose and implemented
a paycard solution. Mark has given presentations on paycards
and paycard implementations at APA Annual Congress and APA Best
Practices Conferences in 2001 and 2002.
About PayStar Financial
PayStar provides the Money Network paycard
in a joint venture with Concord EFS. Concord EFS owns the premier
PIN based networks
in the country with access to over 500,000 ATM’s throughout
the nation. The Money Network PIN based debit payroll card is
accepted at millions of merchant locations across the nation.
EFS National Bank is owned by Concord EFS, thereby providing
a one-stop solution in payroll debit cards (Money Network), network
processing and financial institution settlement.
The PayStar paycard has been in existence since 1993 and is
backed by a trained staff in both implementation services and
a customer service center that is available 24/7.
