Walmart, the nation’s largest employer, has recently made a change that more employers will be making in the next few years. Instead of issuing paper checks and paystubs for employees who do not have direct deposit, they will be issuing payroll debit cards and electronic statements. Pay will be deposited automatically onto these debit cards each payday.
Workers will have one free ATM transaction per pay period, if they want to withdraw all the money as cash. They may also withdraw their money free at Walmart and Sam’s Club registers. The debit card will also function as a regular debit card. Additionally, employees will receive checkbooks, if desired, so that they can write checks on the account.
Initially, I reacted negatively to the idea. It made me think of employer-owned towns, where all your payment, banking, and purchasing were at the discretion of the employer. However, as I thought about it further and read more, I began to consider two aspects of the program which may prove beneficial to employees:
- No More Check Cashing Fees. If employees want to, they should be able to withdraw their entire paycheck, free. I live in a lower-income area with a number of check cashing places. You often see people without bank accounts in there on Fridays and Saturdays–this could save employees money.
- De-facto Bank Account for People With Bad Banking History. Many people who want bank accounts can’t get them because ChexSystems reports their bad banking history. Maybe they bounced a few checks, overdrew too much, and banks won’t risk giving them an account. If it’s convenient for the employer payroll system to give them an account, it’ll be doing some people a favor. The account will be limited, of course, since only money earned at Walmart goes into it, you can’t do other deposits.
Will this turn out to be as good as it sounds?
If the program is implemented well (and it won’t be Walmart running the program, they’re using a company which specializes in this kind of work), then it could be a real benefit to workers who don’t have bank accounts. No more check-cashing fees, no more having to go to the store to pick up paychecks, and a real (limited) bank checking account. For that to happen, Walmart and its payroll partner will have to explain the specifics of the plan to the employees. If the debit cards just show up one week, this could prove far less useful than it has potential to be.
For workers who don’t understand the system, it’ll be like banking anywhere else would be for them–fees, possible overdraft issues, etc. From what I’ve read, it doesn’t sound like this one would be any worse than other banks. And if it proves to cause trouble, then they’ll still be able to withdraw all their money in cash and work with that instead.
What do you think? Too complicated or something that’ll solve a lot of problems?