Many Maine employers are using payroll cards instead of paper checks or direct deposit to pay wages. This is a growing trend around the country. Payroll cards may be good for some employees, but there are risks and hidden costs involved. Here’s what you need to know.
Is it legal to pay my wages using a payroll card?
Maine law allows your employer to pay you using a payroll card system, but your employer must give you a cost-free way to get your pay. The payroll card must allow you to take out all your pay in cash the first time you use the card after each payday. Or your employer must give you an option other than the payroll card to get your pay at no cost, like a direct deposit option.
Federal laws also place restrictions on wage payment through a payroll card. Federal regulations, which have less force than federal laws, say wage payment by credit card and similar devices violates the Fair Labor Standards Act. Federal bank laws and regulations say an employer cannot force you to get your pay through one financial company. Your employer must also offer:
- direct deposit to your bank account, or
- the reloadable card of your choice, or
- payment by cash or check
My employer says a payroll card is better than a paycheck or direct deposit.
Payroll cards can have hidden fees. In Maine, your first withdrawal should be free. If you do not take out all your pay the first time, you may have to pay a fee every time you use the card. You may also be charged a fee for using the card at certain ATMs or a fee for not using the card often enough. If you lose the card, you will probably have to pay a high fee to get a new one.
How is a payroll card different from a credit union or bank account with a debit card?
Federal and state laws protect credit union and bank account owners with debit cards in important ways. They place limits on the fees credit unions and banks are allowed to charge you. For example, these rules limit the overdraft fees some credit unions and banks can charge. (Overdraft fees are fines for taking out more money than you have in the bank.) But there are no rules to limit overdraft fees on payroll cards. If a credit union or bank goes out of business, your money is insured up to $250,000 so you will not lose your savings. But if the payroll card company goes out of business, you could lose all the money on the card.
How is a payroll card different from a credit card?
A credit card may have loss limits and insurance benefits that payroll cards lack. For example, if someone steals your credit card, and you report the theft, you probably will not have to pay for anything the thief charges. Some credit cards also have insurance coverage for things you buy, like car rental. Payroll cards usually don’t have any of these benefits.
Is there any protection for workers?
The federal Consumer Financial Protection Bureau protects workers who get paid by payroll cards. At a minimum, your employer has to give you these protections:
- If you choose to get paid by payroll card, your employer must give you a written explanation of all the fees, limits, and protections that apply to use of the payroll card. The written explanation must be clear and easy to understand.
- The payroll card must give you a way to look at your account balance and 60 days of transactions. If you ask verbally or in writing, the payroll card company has to give you a written history of the last 60 days of your account.
- If someone steals money from your payroll card account, and you report it within two business days, you must be protected against all but $50 of the loss. The payroll card must also give you other theft protections if you report within 60 days.
- The payroll card company must have a way to resolve any mistakes you find in your account history if you report the mistake within 60 days of getting the history, but not later than 120 days after the mistake happened.
Where do I go for help?
If your employer forces you to use a payroll card, and you cannot get all of your wages in cash the first time you use the card after each payday, you should complain to your employer. Tell your employer the payroll card violates Maine’s payroll laws. If the employer does not fix the problem, complain to the Maine Department of Labor Wage and Hour Division at (207) 623-7900.
Many employers should not be using the payroll card system at all because they are subject to the federal Fair Labor Standards Act. If you do not want to be paid on a payroll card, complain to the U. S. Department of Labor. The closest office is in New Hampshire, and the phone number is 1-866-487-9243.
If the payroll card your employer uses does not have all the protections listed above, you can report this to the Consumer Financial Protection Bureau Consumer Helpline at (855) 411-2372, TTY/TDD (855) 729-2372. The office is open 8 a.m. – 8 p.m., Monday–Friday, and they have interpreters. Or submit a complaint online.