The Unbanked and Payroll Cards

For the majority of Americans with bank accounts, the notion of going through life without one might seem strange, but there are many people who do. The Pew Research Center estimates that approximately 25 million Americans do not have bank accounts.

There are many reasons why they don't. They may have had previous problems maintaining and managing their accounts. In some immigrant communities, people harbor a distrust of the banking system due to poor experiences in their native countries. Another common factor is that lower-wage employees are often unable to maintain the minimum balances banks require to avoid paying monthly fees.

While employers are attracted by payroll cards' low cost compared with checks, and employees benefit from convenience and safety, the banking industry views the paycards as a way to reach the unbanked and hopefully convince them to use other bank services.

Payroll cards are also a cheaper way for workers to get their money than current methods. The Comptroller of the Currency estimates that a worker who earns a $400 paycheck every two weeks and who pays at least three bills each month using a money order would pay nearly $250 annually in fees at a check-cashing agency. A basic bank account with a $100 minimum deposit would cost the user $5.95 a month without direct deposit and up to $80 annually, which could go higher if the bank charges for overdrafts, negative balance or excessive phone inquiry fees, and other such costs. Payroll cards, on the other hand, would cost users about the same as the bank account; less if the card issuer doesn't charge users a monthly fee.