Should Your Business Use Paycards or Direct Deposit

Should Your geschftlicher umgang Use Paycards or Direct DepositCredit Creative Lab/Shutterstock An important part of any geschftlicher umgang is how employees receive wages. When there are several options, its up to the employer to decide which one they will offer. Two of the most popular payment methods are direct deposit and paycards, also known as payroll cards. Here are some details about both methods that will help you determine which is right for you and your business.Direct deposit vs. paycardsDirect deposit is an electronic transfer payment made directly from an employers bank account to an employees savings or checking account for net wages earned. A paycard is a prepaid card offered by an employer to pay an employees net wages. Related article What is a Paycard?According to The Balance, direct deposit payments are governed by the National Automated Clearing House Association (NACHA), a nonprofit that overbinnensees the ACH network and other area s of electronic payments. Paycards are regulated by state laws.Editors Note Considering paycards for your business? We can help you choose a payroll tafelgeschirr thats right for you. Use the questionnaire below to have our sister site, BuyerZone, provide you with information from a variety of vendors for free Pros and cons of direct deposit and paycards for employees and employersThere are various reasons why an employee or employer might favor one method over the other. Direct deposit requires the employee to have a savings or checking account to deposit funds. A paycard is simply a prepaid, reloadable card that requires no bank account. Direct deposit allows an employee to divide their paycheck into several accounts, whereas with paycards, a net wage is transferred each pay period.For employers, direct deposit and paycards both provide a paperless payroll distribution process. Both payment methods also allow an employer to electronically transfer funds whether an employee is sick , on vacation or works remotely.Watch out for feesUsing both payment methods eliminates paying for checks, ink and printing costs. However, there are fees involved, no matter which method you use. With direct deposit, employers pay a setup fee in addition to a transaction fee each time they deposit wages into an employees account. The payroll software or service provider may also charge a fee.With paycards, both employees and their employers pay fees. For instance, some paycards charge a fee for ATM withdrawals, a point-of-sale fee each time the card is swiped some even charge fees to check your balance or if you dont use your card within a set period of time (an inactivity fee).Though fees are involved with each payment method, DCR Strategies, a financial services company that provides prepaid cards, reports in their article Direct Deposit vs. Payroll Prepaid Cards that paycards have cheaper fees and are more transparent about them.Banking fees range from $218 to $314 annually for keeping a checking account, the company explains. By comparison, prepaid card fees range from $76 to $261 annually when cardholders use direct deposit to their prepaid card. Without direct deposit, the fees range from $184 to $380.Theft and fraudWhen it comes to theft and fraud, paycards are governed by the same rules as debit cards. According to Debt.org, if you report a stolen or lost paycard within two days the Electronic Fund Transfer Act limits your liability to $50. The maximum loss increases to $500 if you report it more than two business days after noticing its loss but within 60 days after you receive your statement.A cardholder is not liable if a stolen card number is used and a crime is reported within 60 days of the balance statement. One serious disadvantage of using a paycard is that some service companies (hotels, rental cars, airlines, etc.) place a temporary hold or freeze on a card for days or weeks.The benefits of direct deposit for employeesDirect deposit is the norm for most U.S. workers. Many have opted in, allowing their employers to deposit their net wages into their checking or savings account, or perhaps both.For employees, some of the benefits of participating in a direct deposit program include the followingBecause it is an electronic transfer, funds deposited to their accounts are available almost immediately.Direct deposit bypasses the risk of theft and fraud, unlike a lost or stolen paycard.Employees do not have to pay fees to have their check electronically deposited into their account or to access their funds.It saves time and enhances productivity. Employees dont have to interrupt their work day to run to the bank to deposit their check.Direct deposit still dominatesAccording to NACHA, 82 percent of U.S. workers are paid using direct deposit, but paycards are growing in popularity. A 2017 study by Aite Group reported $42 billion in gross dollar volume was loaded onto 5.9 million active payroll cards. Those numbers are project ed to climb to $60 billion on 8.4 million paycards by 2022.Bottom lineIf youre considering making the switch from paper checks to electronic payments, there are a few things to consider. One, check with your state to see what laws apply to direct deposit and paycards. Next, check with your bank and find out what the regulations are. Its also wise to check with both your bank and payroll provider to see what fees, if any, they may charge.If youre considering using paycards, talk with multiple providers and ask them to spell out the terms and conditions, including fees. Finally, ask your employees about which method they would prefer. Ask them what features (convenience, low fees, etc.) matter the most to them and be open about your findings. Gathering this data and getting input from employees will make your choice an easy one.Additional reporting by Nicole-Meade Franklin. Kayla Harrison Kayla Harrison is a current Writing Arts graduate student at Rowan University and editor at The Urban Howl. She began freelancing during her junior year of college and fell in love with it. You can learn more on her blog, insearchofthewritedirection.weebly.com. 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