It wasn’t that long ago when paychecks — rectangular and made of paper — were the standard method of compensating people for their work.
In recent years, however, pay cards are becoming more widely used, particularly for workers who don’t have bank accounts to which money can be sent electronically.
What is a pay card? It’s essentially a debit card that, in our minds, has the potential to offer convenience and security to users.
The downside is that users also can be bogged down with exorbitant fees for usage, and even for not using them.
A bill making its way through the Colorado legislature adds some useful guardrails to pay cards, but we’re not convinced that it goes quite far enough — particularly in the area of potentially predatory fees, which could apply to everything from withdrawals to overdrafts.
As it stands in Colorado, an employer can use pay cards to distribute wages so long as employees get access to their money once a month, without fees. Also, an employee can opt for payment in check or direct deposit.
The current bill would up that to two fee-free withdrawals per pay period, which is good. It would require employers to give employees a schedule of fees associated with using the card, also good.
The measure also allows employers at their discretion to use pay cards if employees haven’t affirmatively chosen to have direct deposit or a paper check.
Going to an opt-out scenario heightens the need for guardrails to protect employees. And so does the growing use of these cards. One of the reasons employers are moving to pay cards has to do with cost savings — they’re cheaper than paper checks.
Under the right circumstances, they can make life easier for employees who can use them like a debit card to buy groceries and other items.
But it’s important to make sure they’re not vehicles for predatory fees or practices.
To send a letter to the editor about this article, submit or check out our for how to submit by e-mail or mail.
