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Innovations and Payment Systems

What is a pay card?

Pay cards offer a convenient way to get paid if you don't have a bank account, but there are downsides to consider


Payroll cards enable employers pay workers with prepaid debit cards instead of via direct deposit or paper checks. Find out about the pros and cons before you accept a pay card as payment.


Thanks to our modern banking system, there are more ways than ever to get paid without ever visiting a brick-and-mortar bank. Your employer may set up direct deposit so your paycheck gets deposited directly into your account on a specific date and time. And even if you receive payment via a paper check, your bank’s app might let you deposit your paycheck using your mobile device.

Interestingly, some employers choose to pay their workers via a pay card, which may also be called a payroll card or a payroll debit card. While getting paid with a payroll debit card can make accessing your money easy with or without a bank account, there are some notable downsides to consider before you agree to be paid this way.

What is a pay card?

A pay card is exactly what it sounds like. It’s a prepaid card that holds your paycheck, which you can use to pay bills or withdraw cash from an ATM.

While payroll cards may not be the norm at the moment, the movement toward pay cards instead of other forms of payment continues to gain steam. According to research from the Mercator Advisory Group, loads on payroll cards reached $40.3 billion in 2017, but that figure is projected to grow to $50.9 billion in 2021.

And even though payroll cards are geared to users who may not have a traditional bank account, pay cards aren’t necessarily used by consumers in a lower income range. In fact, figures from Mercator Advisory Group show that, as of 2019, 18% of pay cards were used by people who earn $200,000 or more, 13% were used by people who earned $150,000 to $200,000 and 18% were used by people who earn between $100,000 and $150,000 per year.

How does a pay card work?

When an employer opts to pay workers with a payroll card, the money that would normally be included in their paychecks is preloaded onto a plastic card. With a pay card in hand, employees can use it to pay for regular bills and expenses just like they would if they received their paycheck the traditional way.

Pay cards can also be used to get money out of an ATM, which makes them similar to debit cards connected to a traditional checking account.

What are the advantages to pay cards?

The advantages of using payroll cards depends on who you ask. For the employer, the benefits of pay cards depend largely on the administrator they use to set them up. However, paying workers with pay cards may be cheaper or more convenient over the long haul.

When it comes to workers’ advantages, the main benefits of pay cards come into play for those who don’t have a traditional bank account. Pay cards make it easy to get paid when you don’t have a traditional bank account and might otherwise have to pay a third party to cash your paycheck for a fee.

Pay cards can also be seen as convenient for employees since they let them access their paychecks right away. This saves them a trip to a bank or check cashing store where they can deposit their check or pay to access their funds.

What are the disadvantages to pay cards?

In terms of downsides, pay card fees are the biggest disadvantage workers should watch for. While fees charged by payroll cards can vary, an employee who accepts this form of payment may be hit with fees when they access an ATM, use their card for purchases, check their balance at an ATM, lose their card, and require a replacement. While some bank accounts charge account management fees each month, pay cards tend to nickel and dime users for everything they do.

Further, pay cards can be lost or stolen, which isn’t the case with direct deposit. Worse, employees can miss out on valuable benefits when they use a pay card instead of another form of payment like a credit card.

For example, paying bills with a pay card won’t let you earn cash back like you can with a rewards credit card, nor will you receive common credit card perks like travel insurance, purchase protection against damage or theft or extended warranties.

Finally, note that payroll cards are debit cards, so they come with fewer consumer protections than credit cards with zero fraud liability. If your payroll card is lost or stolen and used for fraudulent purchases, you could be liable for up to $500 in losses if you report the theft between two and 60 days after your statement is sent to you. If you report theft 60 days or more after your statement is sent to you, on the other hand, the Federal Trade Commission (FTC) reports you could lose “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.”

Is a pay card right for you?

Before you let someone pay you with a payroll card, you should know your employer cannot legally require you to accept payment this way. According to the Consumer Financial Protection Bureau (CFPB), they must give you at least one alternative payment option.

Further, state law determines which options your employer has to offer to you and if they have to obtain your written consent before paying you with a payroll card. The CFPB’s prepaid rule, which went into effect in 2019, also requires employers to present you with disclosures before you begin receiving payment with a payroll card.

There’s nothing wrong with accepting a payroll card as payment, but you should know your rights and accept a pay card only if it’s advantageous to you. If you don’t have a bank account and prefer not to open one, for example, a pay card might be more convenient than getting paid with a paper check.

Alternatives to pay cards

The most common alternatives to payroll cards include a direct deposit in your bank account or a paper check. These options can make it easier to manage your pay on your own terms, but you will need a bank account to accept payment via direct deposit.

Fortunately, some bank accounts don’t require any fees and options with fees that are easy to avoid. In fact, many of the best checking accounts come with easy online access, no minimum balance requirements, a free debit card and plenty of other perks that can make traditional banking more convenient.

Bottom line

Payroll cards offer another way to get paid but don’t accept a prepaid card as payment unless you really want to. A traditional checking or savings account will make it easier to manage your money the way you want, and it’s possible you could earn interest that helps your account balance grow over time.

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