Paycards are employee debit cards that employers deposit wages onto. For employees who aren’t banked, paycards are a speedier alternative to receiving paper checks and are sometimes preferred because they work much like direct deposit. Each pay period, payday earnings are loaded onto the card, which can be used to make purchases, or if the employee prefers, withdrawn in the form of cash from certain ATMs and banks.
However, not all paycards are equal. Many are packed with hidden fees, and it’s the employer’s obligation to disclose fees and charges beforehand. Here’s what’s required of employers when offering employees the option of using a paycard.
Federal Paycard Laws
Employees whose wages are deposited onto a payroll card are entitled to the protections of The Electronic Fund Transfer Act (EFTA) generally, and Regulation E‘s provisions applicable to paycards specifically.
Employers are prohibited from requiring employees to receive their wages on a paycard. Employees cannot be forced to use a particular paycard of the employer’s choosing. Employers may offer their employees the choice between a paycard and another payment method. They are required to give employees the option to choose other wage payment methods. They must disclose to employees the terms and conditions of its paycard program, as clarified in a 2013 bulletin issued by the Consumer Financial Protection Bureau (CFPB).
Paycard holders are entitled to:
- receive initial disclosures of any fees imposed by the financial institutions for electronic fund transfers or for the right to make such transfers
- receive initial disclosures containing, among other things, details regarding limitations on liability and the types of electronic transfer funds they may make with the card
- receive access to their account history, including periodic statements as required by Regulation E generally, or alternatively be given access to check their account balance by phone, receive an electronic history of account transaction’s covering at least 60 days preceding the date they electronically access the account, and upon oral or written request, be provided a written history of the consumer’s account transactions covering at least 60 days prior to the request
- with limited exceptions, be covered by Regulation E’s limited liability protections regarding a period within which an unauthorized transfer must be reported
Regulation E also provides that the disclosures be “clear and readily understandable, in writing, and in a form, the consumer may keep.”
State Paycard Laws
A total of 30 states provide additional protections for employees, enforcing more stringent paycard rules. We’ve linked out to official state regulations wherever possible in order to provide convenient access to the laws as they are written. If you’re curious, keep reading.
| State | Law |
| Alabama | Alabama does not have any specific paycard legislation. |
| Alaska | Alaska does not have any specific paycard legislation. |
| Arizona | According to Arizona’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the consent of the employee, or if the employee enrolls in the direct deposit but doesn’t designate a specific financial institution for deposit. As part of the paycard program, the employer must offer one free withdrawal per pay period, provide a written or electronic pay stub, and provide a written fee disclosure. |
| Arkansas | Arkansas does not have any specific paycard legislation. |
| California | California’s pay laws don’t specifically address paycard usage. However, related laws provide that as long as the payment method the employer uses can be turned into cash without being reduced when converted, it is acceptable. This means that if an employer offers a paycard program, fees cannot be applied when their employee withdraws their cash. The California Labor Commissioner’s Office has stated in an opinion letter that participation in any paycard program must be voluntary. More information is available here. |
| Colorado | According to Colorado’s pay laws, an employer may offer employees the option to be paid via paycard if they offer one free withdrawal to access the entire amount of net pay each pay period, and as long as the employee can choose other pay methods (e.g., cash, checks or direct deposit). |
| Connecticut | According to Connecticut’s pay laws, an employer may offer employees the option to be paid via paycard if they also provide the option to receive wages by direct deposit and paper check, obtain the voluntary consent of the employee (either in writing or in electronic means), offer three free withdrawals, and provide a written fee disclosure. None of the employer’s costs associated with the payroll card can be passed onto the employee. |
| Delaware | According to Delaware’s pay laws, an employer may offer employees the option to be paid via paycard if they offer one free withdrawal per pay period at a bank or other business establishment convenient to the place of employment. |
| District of Columbia | The District of Columbia does not have any specific paycard legislation. |
| Florida | According to Florida’s pay laws, an employer may offer employees the option to be paid via paycard if they ensure employees can withdraw the full amount of their wages, on-demand, without fees, at an established business within the state. The name and address of the card issuer must appear on the paycard or in the paycard issuing materials. At the time the paycard is issued, the employer must have deposited sufficient funds to pay the employee for a minimum of 30 days. |
| Georgia | According to Georgia’s pay laws, an employer may offer employees the option to be paid via paycard if they provide a written fee disclosure at least 30 days prior to the date the paycard becomes available, or at the time of hiring for new employees. Employees have the right to opt-out of paycards at any time through written request. |
| Hawaii | According to Hawaii’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee (either in writing or electronic means), allow the employee to opt out at any time, provide a pay stub, provide a written fee disclosure (in at least 10-point font), offer three free withdrawals per pay period, and ensure that the funds on the paycard never expire. The paycard cannot charge employees overdraft fees, and employees should be able to check their paycard balance without being fined. The paycard program should provide one free replacement paycard per year at no cost to the employee. |
| Idaho | Idaho does not have any specific paycard legislation. |
| Illinois | According to Illinois’ pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee in writing, provide a written fee disclosure, offer payment via check or cash, and ensure employees are offered at least one free withdrawal per pay period, one paper paystub per month, and two free phone balance inquiries. Inactivity charges must not take effect until there has been at least one year of inactivity. |
| Indiana | Indiana does not have any specific paycard legislation. |
| Iowa | According to Iowa’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee in writing, provide a written or electronic pay stub, and offer the employee the ability to withdraw all wages without a fee or charge. The number of free transactions depends on the card’s transaction limit – if the limit is higher than the wages owed, just one free withdrawal per pay period is required. If the limit is half of the wages owed, two transactions per pay period are required. |
| Kansas | According to Kansas’ pay laws, an employer can mandate the payment method by which employees receive wages, including paycards if they provide a written fee disclosure at least 30 days before implementing the payroll program, ensure employees aren’t charged an initiation, loading or other participation fees, and offer the employee the ability to withdraw all wages without a fee or charge. Employees are responsible for replacement fees. |
| Kentucky | Kentucky does not have any specific paycard legislation. |
| Louisiana | Louisiana does not have any specific paycard legislation. |
| Maine | According to Maine’s pay laws, an employer may offer employees the option to be paid via paycard if they provide one free withdrawal per pay period and the option to choose another payment method. |
| Maryland | According to Maryland’s pay laws, an employer may mandate that employees chose between being paid via direct deposit or paycard. Prior to usage, the employee must be provided with a written fee disclosure in at least 12 point font and authorize with voluntary consent. |
| Massachusetts | Massachusetts does not have any specific paycard legislation. |
| Michigan | According to Michigan’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee, offer one free withdrawal per pay period, provide a method for the employee to make an unlimited number of balance inquiries without charge, and does not require employees to pay any fees or costs incurred by the employer in offering paycards. Employees must be notified at least 21 days in advance if there will be a change in fees or terms of service. |
| Minnesota | According to Minnesota’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee (in writing), which must be accompanied by a fee disclosure. If requested, an employer must provide one free transaction history each month. The payroll card shall not be linked to any form of credit. Employees must receive one free withdrawal per pay period. Employees can change the payment method at any time. |
| Mississippi | Mississippi does not have any specific paycard legislation. |
| Missouri | Missouri does not have any specific paycard legislation. |
| Montana | According to Montana’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee (either in writing or electronic means), provide a written fee disclosure, offer one free withdrawal per pay period, provide a written or electronic pay stub, and provide the option to receive the full amount of the wages via a check (or cash, if the employer prefers). Inactivity fees may not be applied when there is a balance on the paycard. |
| Nebraska | According to Nebraska’s pay laws, an employer may offer employees the option to be paid via paycard if they comply with federal law regarding compulsory use of electronic fund transfers, offer one free withdrawal per pay period, and do not pass any fees or costs incurred offering the paycard program to employees. |
| Nevada | According to Nevada’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee, offer one free withdrawal per pay period, and provide a written fee disclosure. |
| New Hampshire | According to New Hampshire’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee in writing, provide a written fee disclosure, allow employees to change the payment method at any time, provide written notice of all the employee’s payment options, provide written notice whenever terms and conditions change and have employees provide written assent that they wish to continue using the paycard. If the paycards used have an expiration date, employers must provide employees with a replacement paycard at no cost to the employee before the current paycard expires. |
| New Jersey | According to New Jersey’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee in writing, provide a written fee disclosure, offer one free withdrawal per pay period, provide a pay stub, and allow the employee to choose a new payment method at any time. |
| New Mexico | Although New Mexico’s pay laws don’t mention paycards specifically, wages can be deposited to the account of the employee if voluntary consent is obtained and the wages are paid in full, with no reduction, deductions, or charges made, unless agreed upon at the time of hiring in writing. |
| New York | Proposed paycard regulations for New York were struck down in March 2017 — at the moment New York does not have any specific paycard legislation. |
| North Carolina | According to North Carolina’s pay laws, an employer may offer employees the option to be paid via paycard if the employee can withdraw all wages on payday and the use of the card on payday is at no cost to the employee. |
| North Dakota | According to North Dakota’s pay laws, an employer may offer employees the option to be paid via paycard if the paycard is issued by a federally insured bank or credit union, and the employer has deposited sufficient funds into the paycard account to cover all wages and fees associated with the paycard account prior to payment. |
| Ohio | Ohio does not have any specific paycard legislation. |
| Oklahoma | According to Oklahoma’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee, provide a written or electronic pay stub, and ensure the employee is not charged a fee for receiving wages by electronic means. |
| Oregon | According to Oregon’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain employee consent verbally, allow the employee to opt-out for a different payment method either verbally or in writing provide a pay stub, and offer the employee the ability to withdraw all wages without a fee or charge. |
| Pennsylvania | According to Pennsylvania’s pay laws, an employer may offer employees the option to be paid via paycard if they do not mandate the use of paycards, if their paycard program has zero fees associated with it if their employees can check their balance for free (electronically or by telephone), if they offer one free withdrawal of all wages earned per pay period, and if they comply with various notice and authorization requirements. The employee is allowed to receive one replacement card per calendar year for free. |
| Rhode Island | According to Rhode Island’s pay laws, an employer may offer employees the option to be paid via paycard if they obtain the voluntary consent of the employee, offer one free withdrawal per pay period, and provide a means of checking their payroll card account balances. |
| South Carolina | South Carolina does not have any specific paycard legislation. |
| South Dakota | South Dakota does not have any specific paycard legislation. |
| Tennessee | According to Tennessee’s pay laws, an employer may offer employees the option to be paid via paycard if they offer one free withdrawal to access the entire amount of net pay each pay period. |
| Texas | Texas does not have any specific paycard legislation. |
| Utah | According to Utah’s pay laws, an employer may offer employees the option to be paid via paycard if they offer one free withdrawal per pay period, provide a written or electronic pay stub, and ensure the full amount is on their paycard on payday. |
| Vermont | According to Vermont’s pay laws, an employee must give written consent after receiving a disclosure on paycards. Employees must receive branded paycards and must be provided at least three free withdrawals with access to the full amount of the account balance at a federally insured depository institution or other location convenient to the place of employment, None of the employer’s paycard account costs can be passed on to employees. Upon written or oral request, the employee must be provided one free written transaction history each month. The employer also must ensure that the employee has the option of electing to receive the monthly transaction history by e-mail. The employee can discontinue receipt of wages by a paycard account at any time. The employer ensures that the payroll card account provides one free replacement payroll card per year. |
| Virginia | According to Virginia’s pay laws, employees must able to withdraw or transfer funds with a full written disclosure of any applicable fees. After January 1, 2010, if the employee fails to designate a financial institution for direct deposit, employers are permitted to pay wages to a paycard account without employee consent. Employees must be allowed to make at least one free withdrawal or transfer per pay period. |
| West Virginia | According to West Virginia’s pay laws, an employer may pay wages by depositing into an employee’s paycard account in a federally insured depository institution. Payment of employee compensation by means of a payroll card must be agreed upon in writing by both the person, firm or corporation paying the compensation and the person being compensated. |
| Wisconsin | According to Wisconsin’s pay laws, an employer may pay an employee his or her wages in the form of an electronic fund transfer to a paycard account if the employee consents in writing or is authorized by a collective bargaining agreement. |
| Wyoming | Wyoming does not have any specific paycard legislation. |
When paycard programs offer employees fair value and access to their wages, they deliver convenience, simplicity, and broadened options for underbanked employees.
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