Payroll cards: Workers often pay fees to get paid

More employees are getting paid via payroll debit cards issued through their employer.

How we get paid has changed. A total of $68.9 billion will be loaded onto payroll cards by 2017.

Earn little, get paid less.

That's what some low-wage workers are saying about getting paid through employer-issued payroll debit cards.

Such cards can be packed with fees to withdraw money, meaning some employees can end up making less than the minimum wage once the charges are added in, The New York Times reports.

"It’s pretty bad. There’s a fee for literally everything you do." Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald's in Milwaukee, told the newspaper. He said fees associated with his JPMorgan Chase payroll card take $40 to $50 a month out of his paycheck.

GOING PAPERLESS

The use of payroll cards is growing rapidly.

According to the business research firm the Aite Group, nearly $43 billion will be loaded onto these cards this year, double what is was in 2010. Aite projects that total to reach $68.9 billion by 2017.

Related: Plastic paychecks shrink salaries, suit says

Taco Bell, Walgreen and Wal-Mart are among the dozens of well-known companies that offer prepaid cards to their workers, the Times said.

Typically, payroll debit cards are automatically loaded each pay period with the value of a worker's paycheck. The worker can use the card to get cash at the bank or ATMs, or to make purchases at retailers, up to the amount of the paycheck.

Companies like payroll cards because they can reduce the cost of processing payroll and distributing paper checks. Employers say the system can be convenient for workers, too – especially those who don't have bank accounts.

Related: Why prepaid cards are replacing paychecks

But in most cases, the Times reported, the person using the card has to pay a fee, and these can quickly add up. The newspaper cited one example of a card provider that charges $1.75 to make a withdrawal from most ATMs, $2.95 for a paper statement and $6 to replace a card.

FEE OF 'CONVENIENCE'?

Bill Dunn, director of government relations for the American Payroll Association, disputed the notion that payroll debit cards shortchange low-income earners.

He noted that federal regulations governing electronic funds transfers stipulate that employers can't pay their workers by payroll debit card only and that an alternative, such as direct deposit, must be provided.

Also, Dunn told MSN News, under federal law employees must be able to access their pay without incurring any fee. In the case of payroll cards, this means they could go to the bank that issued the card to withdraw their pay, or to any bank that displays a Visa logo, for example, if it's a Visa-branded payroll card.

If an employee chooses to go to an "out of network" financial institution or ATM, employers can't control the fees that might be charged, Dunn said.

"Every card is going to have fees associated with it but there's going to be a way for every employee to get their money right down to the penny every pay period without incurring a fee," Dunn said.

Related: Card fees chip away at unemployment benefits

Much like regular debit cards, Dunn said, holders accept the fee in exchange for convenience.

"I know I can go somewhere and not have to pay a fee, but for my own convenience I accept that fee," he said.

"That’s the same way these payroll cards work. Every employee who gets paid with a payroll card has to have access to their entire pay right down to the penny without paying a fee."

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