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Pros and Cons of Payroll Cards

Aug 5, 2022

Disbursing salaries to the unbanked and underbanked is a crucial challenge for businesses. Direct debit, paychecks, and demand drafts are clearly not suitable options as their bank accounts are either inactive or non-existent. Though paying in cash sounds easier, it involves immense effort in calculating, withdrawing, distributing, and bookkeeping. 

Businesses worldwide grapple with the responsibility to pay their underbanked employees on time with utmost security. They leverage digitized payroll cards to optimize salary disbursal and deliver secure and seamless payouts. 

So, what is a payroll card? What are its pros and cons? 

Keep reading to know. 

What is a payroll card? 

A payroll card is a prepaid card that employers use to pay their employees. The employer (business) loads the card with wage or salary via the respective routing/account number. These cards are reloadable and can be issued both in virtual and physical forms. Businesses are adopting customized payroll card programs to embrace sustainability, optimize their financial and human resources, augment bottom line performance, and extend value to employees. 

Payroll cards are a secure alternative to direct deposits (bank accounts), cash payments, and paychecks. They are ideal for traditional recurrent disbursals, daily wages, fees, just-in-time allotments, and other customized payments and reimbursements. They function like regular debit cards and can be used to make cash withdrawals, POS payments, utility payments, money transfers, and balance inquiries. 

Payroll cards help the unbanked segments receive salaries in a structured way while helping them save and track their spending. It eliminates the need for a bank account or physically going to a bank to cash a paycheck.  

Types of payroll cards

Payroll cards can be customized according to business requirements. They are broadly classified into four categories.

  • Branded payroll cards – The branded cards carry the card network logo and can be used for domestic and international transactions. 
  • Personalized payroll cards – These cards have the respective card holder (employee) name printed on the card. 
  • Instant issue payroll cards –  As the name suggests, these payroll cards are issued on the spot. So they do not carry the name of the cardholder. 
  • Portable payroll cards –  If the cardholder holds multiple jobs or has cash flowing in from several sources, then portable payroll cards come in handy.  These cards can accept government benefits, tax returns, and salaries from consecutive employers. 

The above-mentioned card types are not mutually exclusive. They can be mixed, matched, and customized as per the need.

Now, let’s check out the pros and cons of payroll cards for businesses and employees. 

How payroll cards benefit businesses?

For employers who intend to take full advantage of electronic fund transfer, prepaid payroll cards are a befitting option. The payroll cards program streamlines the payroll process while creating a win-win situation for unbanked employees and their employers. It is also deemed as an economical alternative to issuing paychecks. 

Here are some of the benefits: 

  • Reduces cost, effort, and time – The payroll card program reduces the costs and time associated with accounting and administration. It cuts down production effort involved in handling manual paychecks and issues associated with lost or stolen checks, stop payment orders, fraudulent cashing of duplicate checks, and more. It minimizes charges related to bank transactions and eliminates escheat issues. 
  • Increases efficiency – Payroll cards use API-based tech stacks that leverage financial technologies to increase the efficiency, pace, and accuracy of payroll processing. Payrolls can be processed in no time, and disbursals can be optimized to their fullest potential.
  • Boosts sustainability – The rise of paperless, digitized payroll in the form of virtual and physical cards helps businesses embrace sustainable finance and operations. Payroll cards eliminate the need to cut trees for the paper required to produce physical cash, cheques, account stationery, and more. When the cards are metallic, plastic hazards too get out of the picture. Thus payments and salary disbursals can be made in a green and eco-friendly manner.
  • Builds trust and reliability – As salaries get credited to the card on time without the hassle of check bounces or bank strikes, the reliability factor of the employer increases. Employees trust their payroll cards will be ready to use without any security issues.
  • Drives employee loyalty – All employees who have payroll cards are eligible for real-time payments regardless of their relationship with the banks. This ensures that salaries are credited to all cardholders instantly without any bias or hassle. Irrespective of being banked or unbanked, employees can use this cashless payment instrument to spend, save and track their expenses safely. These inclusive processes and initiatives drive employee satisfaction and loyalty. 

Employee welfare is an integral part of any organization. Therefore, it is imperative to recognize and evaluate the advantages and disadvantages of employee payroll cards. It helps you make informed and better decisions that nurture the overall growth of the employees and the business. 

How payroll cards benefit employees?

For employees, payroll cards provide a convenient way to access wages/salaries without physically going into a bank or opening a bank account. Employees can use payroll cards at any merchant that accepts debit cards. They can also help employees avoid check-cashing fees and other charges associated with traditional banking products. 

Payroll cards offer many other advantages to employees. 

  • Instantaneous, easy to use, transparent, and secure. 
  • Provides a convenient way to receive salary/wages without a bank account. 
  • Eliminates the hassle of cashing the paycheck. 
  • Promotes financial wellness as cardholders can track their spending and budget more efficiently with a payroll card. 
  • Helps employees stay without debt. as the spending can be monitored and controlled. 
  • If the card is lost or stolen, it can be blocked to reduce fraud and loss of funds.  
  • Can be used to incentivize employees through reward points, cash backs, and discounts on transactions. 

Downsides of payroll cards

Like any other good thing in life, payroll cards also come with their own downsides.  

  • First off, most cards come with monthly maintenance charges and may apply additional fees for certain transactions like balance inquiries, ATM withdrawals, and similar activities.  
  • The second major downside may happen when there is a card “freeze.” Some service companies place a temporary hold or “freeze” on a card for several days or sometimes even weeks. Employees who do not have a bank account will be unable to make any payments until the freeze is relaxed.  
  • Further, if the card is lost/stolen, the employee will not have access to the funds until a new card is replaced. 

Are payroll cards a right fit for your business? 

Payroll cards serve as a multi-functional tool for employees to create a robust everyday financial system that works for their specific lifestyles. According to surveys, consumers worldwide are actively choosing payroll cards over other forms of payment. In fact, even though most cardholders have access to a bank account, they prefer payroll cards because of the seamless functionality, cross-functional potential, and ability to control income by distinguishing it from other finances. 

Now you know why payroll cards are a right fit for your business!

When you make your employees’ financial lives easier, their productivity and loyalty increase multifold. Turnover rates reduce and efficiency improves. Businesses employing the payroll card program have ascertained that it saves time and money, enhances security, improves payment infrastructure, and eliminates issues concerning cash disbursements.  Most importantly, they bridge the financial inclusion gap for employees without easy access to traditional banking services. When implemented correctly, payroll cards can be an efficient tool for managing employee expenses and compensation. 

How modern card issuance helps?

The advantages of payroll cards are synchronous to the agility and scalability of a modern card issuance platform catering to the gig economy and flexible working environments across the globe. The platform enables various features like seamless onboarding with an integrated identity verification solution, building multiple use cases like single-use cards, virtual cards, early salary, meal cards, shopping cards, etc., for the card users. The modern mobile-first cards offering instant limits and controls across different payment modes and transaction amounts ensure security and risk management for both employees and employers. 

Now, still wondering if payroll cards are right for you? Or are you looking for a robust payroll card program?

 You can get in touch with us at  We’ll be happy to help. 

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