Tired of spending payday picking up your check from your employer, only to race to the bank or check cashing center before it closes so you have access to your cash? A payroll card may be a solution. It provides easy access to your paycheck, while eliminating the need to receive and cash a paper check, or even to have a bank account.

Here’s a look at what payroll cards are, how they work, and what you should know about them before you ditch your traditional paper paycheck in exchange for a payroll card.

How Does a Payroll Card Work?

Payroll cards look similar to debit cards, but they’re not linked to the employee’s personal bank account. Instead, according to Consumers Union, all the payroll cards an employer issues to staff are typically linked to one account held in the employer’s name.

On payday, an employee’s earned wages are loaded directly to his or her individually assigned payroll card. When the funds are depleted, the employee keeps the card; wages owed are reloaded to the card on the next payday.

The Benefits of a Payroll Card

For employees who do not have a traditional bank account that may be required to receive paychecks via direct deposit, or want an alternative to cashing paper paychecks at a bank or check cashing center, payroll cards can be a convenient option. They may also benefit employees who don’t want to go into work to pick up a paper check on payday, or wait to receive it in the mail.

Payroll cards can benefit employers by reducing the costs and administrative burden associated with issuing paper payroll checks.

While the consulting firm Aite Group estimates that nearly nine million employees will receive their wages on a payroll card in 2016, the popularity of payroll cards is on the rise. The firm predicts that more than 12 million employees will be paid via payroll card by 2019.

The Drawbacks of a Payroll Card

While a payroll card may offer conveniences for some employees (especially those who do not have bank accounts) and employers, many involve fees and specific terms for use.

While the details of payroll card programs vary based on the provider an employer uses, Consumers Union notes that payroll cards commonly charge fees for ATM use (assessed either by the payroll card provider, the ATM operator or both). Some also charge usage fees at the point of sale, inactivity fees and fees for the replacement of a lost or stolen card.

Although some payroll cards allow employees to establish automatic payments to pay recurring bills, the employee is ultimately responsible for tracking the amount of available funds on the payroll card. If the card does not have adequate funds to cover a purchase, some payroll cards will decline the transaction; others may assess an overdraft fee.

Should You Be Paid With a Payroll Card?

Whether a payroll card will benefit an employee depends on their financial life, their reasons for using a payroll card and the program an employer uses. It’s important for all employees to understand the fees, restrictions and terms of use for their employer’s program, before opting to be paid via payroll card.

If you don’t want to participate in the payroll card program your employer offers, you do not have to. The Consumer Financial Protection Bureau┬áreminds┬áthat employers who use payroll cards must offer at least one alternative method for paying employees, which may include a paper check, direct deposit into a bank account or both.

Legal Disclaimer: The articles and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. 

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