Q: My workplace is offering employees a choice of receiving their wages by direct deposit or pay cards. What are the main differences between the two options?
A: Direct deposit means your paycheck will be deposited right into your checking account, while a pay card works much like a prepaid gift card. There are many other differences, though. Here’s some things you’ll want to know about the two options:
1. Attached fees
When your paycheck is directly deposited into your accounts at Azura Credit Union, you keep every dollar; we never charge you for putting money into your account.
With pay cards, though, fees are often attached to every point-of-sale transaction. Also, in order to access your cash, you may need to use an ATM, which means you may have to pay a surcharge to the ATM owner for doing so.
The wage payment statutes in most states require employees to be provided with at least one means of accessing their full net wages each pay period without incurring any fees.
ATM withdrawals do not satisfy this requirement, since most ATMs only dispense cash in $5, $10 or $20 increments, and because most financial institutions impose daily withdrawal limits.
To comply with this regulation, pay card programs must provide employees with at least one alternative way to access their salary. Some programs use branded cards, allowing the employee to withdraw the entire amount off the card from a financial institution that displays the card logo. Other programs offer courtesy checks in the amount of the employee’s wages or permit workers to transfer the funds to a checking account.
Regardless of which option is offered by your pay card program, you may not want to be bothered with the hassle and will simply use the card like a debit card — and thus pay the price for that convenience.
2. Account-less pay
One of the biggest draws of the pay card is the convenience it offers employees who do not have a checking account in any financial institution. Fortunately, Azura offers FREE checking that you can apply for with ease online - find out more.
3. Budgeting basics
It isn’t easy to set aside money for savings every month. When you’re paid with a pay card, you have to take the additional steps of withdrawing the money using the card and then depositing it in your accounts.
In contrast, direct deposit makes it simple. Your money is sent directly to your checking account and you can ask us to also transfer a portion of your salary into your savings account each pay period.
A pay card can feel like cash — so it can quickly burn a hole in your pocket. It’s easy to spend it all on your regular expenses and lots of impulse purchases you would otherwise have never made. If you believe that could be a problem, consider going with Direct Deposit if it’s available. And, of course, if you still have questions or would like to talk further, please call, click or stop in at Azura Credit Union.
