Saturday, May 26, 2018
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Pay (and pay) cards

You must spend money to make money: That may be true, but it doesn’t follow that you should have to spend money to get the money you already made.

Yet that’s happening, as an increasing number of employers change their payroll systems to issue prepaid cards — they’re like debit cards — instead of traditional paychecks or direct deposits to workers’ bank accounts.

The argument in favor of the pay cards is obvious for employers: They’re cheaper to issue. There’s an argument that the cards benefit workers too, because funds become available on payday without the delay of waiting for and cashing a check.

But there is a big drawback to the cards, which hits America’s lowest-paid workers the hardest at some of the nation’s largest employers, including Wal-Mart. Most of the cards charge the customers — the workers — a fee to get their money from an automated teller machine. That’s not right.

A charge of $1.50 per withdrawal may not seem like a lot. But these fees can add up, especially if there are other costs such as monthly charges for statements, card replacement, inactivity, or using a bank other than the one that issued the card.

An employee at a McDonald’s restaurant in Milwaukee told the New York Times he spends $40 to $50 a month on fees associated with his pay, and he earns only $7.25 an hour. That’s a sizable chunk of his income.

Proponents of the cards argue that they are cheaper than using a check-cashing service, which typically charges at least a 3 percent fee. But the fast-food worker’s experience refutes that.

Government agencies also are starting to introduce the plastic payment method. That’s the wrong way to go. State and local governments should be trying to protect workers and consumers from exploitation, not using the service just because they can save a few bucks on payroll processing.

When it comes to employee compensation, pay cards are illegal in some states that define card fees as invalid deductions from wages. There’s nothing wrong with paying employees with debit cards, as long as there are no charges associated with using them.

Workers are entitled to full payment of their wages. As the use of pay cards grows, regulations are needed to protect employees who are just trying to collect what they’re owed for their labors.

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