How a Paycard Works

Paycards operate in a manner similar to traditional debit debit cards that are linked to an employee's checking and/or savings account. The primary difference between these two types of cards is that an employer establishes a banking relationship with a specific financial institution as opposed to the employee doing so on his or her own.

On payday, the employer electronically deposits an employee's full net wages into the employee's paycard account. Most paycard accounts are structured as pooled or omnibus accounts with individual subaccounts owned by each employee. Upon deposit into the account, ownership of the funds transfers to the employee. The employee can then use the paycard to access his or her wages in cash without cost. Alternatively, the employee may choose to store some or all of his or her wages in the paycard account for safekeeping and use the card to make purchases and/or pay bills in person, online, or over the telephone.

All programs should provide employees with the ability to access their full wages each pay period without cost. This practice enables employers to meet their legal obligation to pay workers their wages "without discount," as required by many state wage and hour laws. Many programs provide multiple means of free cash access.