Plastic vs. Paper: Another Debate

Used to be that whenever I got in line at the grocery store I started sweating over the old "paper or plastic" question. It's a trick question because as we now know both answers are wrong. BYOB--that's what they really want to hear. But now the plastic vs. paper debate has invaded the paycheck.

Many companies are switching over to debit card payroll systems. Instead of receiving paper checks employees get what looks like a debit card loaded with their pay.

Here's what some debit card payroll providers have to say:
Payroll Debit Cards allow business owners to streamline the payroll process, saving time and money, and eliminating the need to issue paper checks. Using payroll debit card enhances the employee experience by cutting the fees and hassles associated with cashing paper checks.

All of your employees, regardless of financial status, can enjoy the benefits of this payroll card.

...your employees will also avoid check cashing fees and the insecurity of carrying cash.

Okay, let's cut through the marketing. For employees the payroll debit card stinks. It stinks bad. This bad:

1) The statement that these cards are good for all employees regardless of financial status is wrong. These cards further discourage employees who use check cashing services from opening a regular bank account. It encourages poor money management.

2) It discourages saving. The card can be used to get cash from an ATM or to make purchases.

3) FEES! Yes, I'm screaming. Typically the card will not be drawn from a local bank. Therefore, whenever the employee wants to get cash they will need to pay an ATM surcharge fee. Plus, some cards carry monthly maintenance fees since they are not intended to be just sitting around.

4) Debit cards can still be confusing or intimidating to some people.

So who uses these cards to pay employees? Mostly large companies that employee many part-time employees you know like high school kids, retirees, foreign born workers.

There is a way around payroll debit cards. It's direct deposit. With direct deposit everybody wins. Employers don't have to cut checks. And employees are encouraged to manage their money through a financial institution.

One misconception about direct deposit that employers and employees need to know: You don't have to have checks to sign up for direct deposit. What you need are the routing, transit and account numbers. That's what the accounting department uses to set up the electronic payroll transfer. But accountants like to be exact. So to avoid confusion they always ask employees to provide a check. More people, especially young or part-time employees don't need or want checks. For those people--you can get the teller or member service rep to print a formal document that shows the routing, transit and account numbers in an official format that makes the accountants happy.

So when an employer asks you "paper or plastic payroll" it's still a trick question just like the grocery store. The real answer is direct deposit.