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Editorial: Paying for the privilege of getting paid

Earlier this year the New Hampshire House killed a proposal that would have allowed businesses to pay workers by direct deposit or with a payroll card that functions like a debit card without first getting their permission – essentially eliminating the requirement that they give workers the option of an old-fashioned paper paycheck.

For now, New Hampshire remains one of two dozen states that require the paper check option. But even here the need to better regulate the payroll card industry is clear.

An eye-opening story in the New York Times on Sunday described the significant burden of fees imposed on low-wage workers who get paid via payroll cards, voluntarily or otherwise. The cards are loaded with their pay, which they then access via ATM machines, many of which impose fees – sometimes hefty ones. Card-holders who don’t use their cards frequently enough are sometimes subject to a separate financial penalty. Workers who want to transfer money from their card to a checking account sometimes have to pay for the privilege.

Workers can be charged a fee for checking their balances, for using the card to make a purchase, to get a reprint of their account statement or to close their account.

The burden of all these fees falls hardest on those least able to afford it. The fees can take such a big bite out of workers’ pay that some are left with less than the minimum wage.

Payroll cards are, of course, a good business for banks because unlike traditional debit and credit cards, they are not subject to many of the same regulations, including recent limits on similar fees. For example, an “inactivity fee” is now banned on credit and debit cards but not on payroll cards; such fees can be $7 or more.

What can be done? In Oregon, state workers included such banking issues in their contract negotiations and won the rights to unlimited withdrawals at any bank, eliminating an overdraft fee and reducing others as well. More modestly, in New York, lawmakers have considered requiring at least one fee-free withdrawal per pay period.

Paper paychecks may well be on their way out. They’re more expensive for employers and, for most workers, less convenient. But surely it is in everyone’s interest to not have to pay for the privilege of getting paid.

This debate is blown out of proportion. The solution is better regulation of pay cards and technology integration. When the banks started charging fees someone to cash their paycheck at the bank the check is drawn on if the individual didn't have an account the state stepped in and said the Banks had to charge the employer the fee. This cause most banks to drop the fee as Employers don't want to bank with someone that charges them to cash their own checks. The same thing could be done with the paycards, if the DOL and Banking Depts stated that all fees must go onto the employer you would see a rapid shift in how these are implemented. Checks are becoming antiquated regardless, soon peer to peer transactions can be done without banks, similar to paypal. Google's own GMAIL offers the ability to transfer money within the email now. Smartphones can transfer money, even the Cumberland farms gas pumps can exchange money from your bank account with no fees.

Sorry for the run on sentences and a few grammar errors. Wish there was an edit feature.

Included with this story should be fees tacked on to ATM transactions to do things like pay one's electric bill by phone. Utilites in NH should be forbidden to do business like this, where a $2-3 "convenience fee" is added to the bill when a person calls them up and pays by card over the phone. PSNH and TDS both currently get away with this nonsense.

City of Concord nails you for $7 to register a vehicle using the debit card

For those that remember, when the debit/ATM cards first started there were no fees. Banks said they wanted to use them to help cut costs, the bank would "save" money. Once they became widespread the fee's started one after another. And today, we finally get to the ultimate fee, a charge for not even using the card. The bank does nothing and charges the card holder. If a company does not want to write a check and the workers does not want a debit/ATM card for whatever reason, the law should be the worker must be paid in cash.

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