They appear to offer convenience, but the prepaid debit cards offered by employers may actually cost employees more than they are worth.
This post originally appeared at Occupy Democrats
by Ivan Gray
In response to growing concerns regarding undisclosed and hidden fees on an employee’s pay, New York’s Attorney General Eric Schneiderman is taking point and heading an investigation into whether workers at retail giants are getting a fair shake or not. Schneiderman’s office is quoted as stating, “We are concerned about excessive or insufficiently disclosed fees which may unduly reduce employees’ take-home pay,” in the letters sent to corporate titans such as Home Depot, Walmart, and Walgreens, as reported by Bloomberg News.
The investigation is less about the amount employees are paid, and more investigative on the grounds of just — how — employees are paid, since in some states, such as Schneiderman’s state of New York, many employees put bread on the table in the form of a prepaid card issued to them by their employer. The primary concern being how other types of prepaid cards often have extensive charges for their use — granted, prepaids are big, big business anymore, Green Dot alone reported 4,200,000 active cards in 2011, and over $16,100,000,000.00 in gross funds loaded onto it’s funds last year.
The majority of these types of cards are marketed with, “DEBIT” in big letters, all-caps as an incentive to indicate ease of use for those uncomfortable with using credit cards frequently, or who desire more convenience than traditional paper checks. From online purchases, to grocery stores, these cards can be quickly and easily used and are accepted -almost- anywhere … with all this traffic, any reasonable business owner will quickly see a golden opportunity to engage in the most lucrative business since the fall of alchemy — making money off of money. It’s simple really, there’s no bells and whistles, no gimmicks, just a monthly charge for membership, (Anywhere from $2.95 to $9.95, generally.) plus small usage charges for performing menial tasks, such as making a balance inquiry, or using an A.T.M. to transfer money from electronic signals and pixels into cold hard cash. $1 per balance check may not — seem — like a lot, but it adds up quick, especially for individuals working for minimum wage or close to it, such as those who have a daily 9-to-5 with a retail colossus like the ever infamous Walmart.
These issues give rise to an understandable concern over how this extends into the realm of payroll cards, concerns which are in fact, justified. Earlier this week, the New York Times reported on exactly that topic, and it’s findings were both expected, and disheartening. American citizens paid hourly through payroll cards may in fact be -worse- off than those using a typical prepaid, with higher fees, (With rates as high as $1.75 to make an A.T.M. withdrawal, $2.95 for a paper statement, and a $6.00 replacement fee in some cases. All of this is compounded by some cards having an, “inactivity fee” for lack of use, up to $7.00 with some.) It’s almost insulting, when one thinks about it, being charged $7.00 for not spending money frequently enough, considering that with a federal minimum wage of $7.25 you can lose an hour’s worth of the already skimp wages from stocking shelves or flipping patties simply for trying to save money, or for not being a consumer slave that buys off of — every — commercial and advertisement, with only the level of restraint exercised by a young child in Willy Wonka’s Chocolate Factory.
Shouldn’t we change that?