Also known as a paycard or payroll debit card. A stored-value (or prepaid) card used to pay employee wages, salaries, and other compensation.

On regular paydays, electronic fund transfers of employee wages, salary, or other compensation, including commissions, are made to a payroll card account operated or managed by the employer, a third-party payroll processor, depository institution, or any other person. Employees access their wages using payroll cards, which operate like typical debit cards.

Unlike direct deposit, employees do not need a bank account to participate in a payroll card program. Payroll cards are not linked to a checking account and are not intended to be a savings vehicle. Employees typically cannot make personal deposits into payroll card accounts and do not earn interest on the funds.

Historically, payroll cards were proprietary and accepted only at issuer locations and the few merchants that accepted PIN-based transactions. Today, payroll cards are often branded by Visa or MasterCard and can be used where major debit and credit card (signature-based) transactions are accepted. Like credit and debit cards, payroll cards can be embossed with the participating employee's name to improve account security. Payroll cards can be used to make ATM withdrawals, make purchases online and by phone, make cash-back transactions, and pay bills and utilities.

The federal Fair Labor Standards Act (FLSA) is silent about wage payment methods, including payroll cards. However, the consumer protections of the federal Electronic Fund Transfer Act (EFTA) and Regulation E, which implements the EFTA, apply to prepaid accounts, including payroll card accounts. Under the EFTA, employers cannot make payroll cards a condition of employment. Additionally, the EFTA imposes significant disclosure requirements and other obligations on the financial institutions where payroll card accounts are established.

Different or additional requirements may apply under state and local law. For example, many states have payroll card disclosure and employee consent requirements and limit associated fees. For more information on state law requirements, see State Direct Deposit and Payroll Card Laws Chart: Overview.

For more information on payroll cards, see Practice Note, Paying Employee Wages with Payroll Cards.