Pros and Cons of Payroll Card Programs: Are Paycards Better?
Payroll cards offer a convenient, debit-like way for employees—especially the unbanked—to access wages, while saving employers money on check processing. However, clear fee disclosures and strong data security are essential to ensure trust and compliance.
Digital payments are now commonplace. According to a recent PYMNTS Intelligence report, Tapping into the Future of Payments, 85 percent of Generation Z and 82 percent of Millennials prefer contactless digital payments. Financial firms are taking notice, with 94 percent of banks investing in modern payment technologies.
Just as consumer mobile device adoption spurred enterprise investment, the move to digital payments offers an opportunity for employers: the ability to use pay cards rather than paper checks. In this piece, we'll explore the pros and cons of payroll card programs, examine the growing impact of regulatory trends on payroll choices and offer best practices for pay card implementation.
What is a payroll card?
A payroll card, also called a pay card, is a type of prepaid debit card.
Those participating in the program receive a personal payroll card, and wages are deposited onto this card each payday. Employees use the card to withdraw money at ATMs or make purchases. Some cards also let users pay their bills directly.
Pay cards offer a convenient alternative to paper checks and direct deposits because they don't require an existing bank account. Instead of waiting in line to cash a check — and potentially paying a fee for that service — employees can access funds immediately.
Pros and cons of payroll card programs
While the following pay card pros may outweigh the potential cons, both factors influence the decision to adopt a new payment strategy.
Payroll card pros
Common pay card pros include:
- Speed and accessibility
Wages deposited on payroll cards are typically available immediately and don't require an existing bank account. According to data from the FDIC, 14.2 percent of U.S. households remain underbanked, while 10.6 percent of black and 9.5 percent of Hispanic households are unbanked.
- Cost reduction
Businesses and employees can save money with pay cards. Users can avoid paying check-cashing fees at banks or other institutions, while organizations can eliminate issuing costs, which the Association for Financial Professionals (AFP) puts at $2.01 to $4.00 per check.
- Fraud prevention
According to data from the Financial Crimes Enforcement Network (FinCEN), financial institutions reported more than 680,000 instances of check fraud in 2023. Despite this concern, a PYMNTS study found that 75 percent of organizations still use paper checks. Pay cards generally eliminate the need for physical checks, making fraud more difficult.
- Employee satisfaction
Satisfaction plays a key role in employee retention. As noted by a Gallup survey, just 18% of those surveyed said they were "extremely satisfied" with their jobs in 2024. On-demand access to paychecks can boost employee satisfaction. Consider that according to EY research, 69 percent of Generation Z prefer debit cards over credit cards to help them live within their means. Pay cards can provide the same benefit.
Potential pay card cons
Businesses must also navigate possible payroll card cons, such as:
- Transaction fees
Pay cards may come with transaction fees, including ATM withdrawal, balance check and monthly fees. Businesses should carefully vet any payroll card provider before signing an agreement and clearly communicate any fees to staff.
- Data security
For pay cards to work, employees must provide personal and financial information. As a result, data security is critical, and businesses must implement robust data encryption.
The evolving role of regulatory trends in payroll choices
Payroll regulations and compliance expectations continue to evolve in 2025. For example, multiple states have passed pay transparency laws, which allow staff to freely discuss wage differences and require businesses to openly communicate pay rates for different roles. International rules such as the European Union Working Time Directive (WTD)—which specifies minimum standards for weekly working hours, break periods and paid leave—also impact payroll for international organizations.
While pay cards are not a requirement, they can simplify compliance. For example, if state authorities audit a business in response to a wage fairness complaint, payroll cards provide a complete and easily accessible record of all payment transactions.
Best practices for implementing payroll cards in 2025
While the specifics of pay card plans may differ across organizations, three best practices can help streamline implementation for any business.
Educate employees with full transparency
Before implementing a pay card plan, educate and inform staff. Be transparent about how cards work, what features they offer and where transactions may incur fees. Then, ask for feedback. Even the best pay card plan won't work if employees aren't on board.
Offer multiple options
For some people, pay cards are ideal, while others prefer physical checks or digital deposits. Offering two (or more) payment options can help boost employee satisfaction.
Conduct regular audits
Carry out regular surveys to ensure payroll cards remain convenient and secure. In addition, schedule quarterly audits to evaluate compliance. Common compliance concerns include employee classification and overtime calculations, as well as state and local wage regulations.
Learn about paperless pay with flexible, cost-effective payments that help financially empower your employees.
