Paper or plastic? More businesses are switching to paperless pay systems

Direct deposit of paychecks is nothing new, but some employees now have the option of receiving their paychecks directly through a payroll debit card.

"It's just starting to catch on in our area," says Mike Unverferth, director of CPU Inc. of Cape Girardeau. "It's been more prevalent in larger areas, but lots of banks and card issuers, like Mastercard and Visa, have been doing this for a long time. It's fairly new here."

Paycard systems have benefits for both employers and employees.

"Employers don't have to reconcile all the checks back to the checkbook register. Problems with lost and stolen checks go away," says Steve Jordan, account executive with Performance Benefits Inc. of Sikeston, Mo. Paycards also simplify the escheatment process, when employers must legally pay terminated employees for any remaining time worked, and saves the cost of printing, shipping and mailing paychecks.

According to Jordan and Unverferth, paycards are ideal for employees without bank accounts, as the cards work much like regular bank debit cards. Paycards can be used at the ATM or while shopping, and users can check their balances online. Even employees who do have bank accounts enjoy using paycards for online shopping, says Jordan, because they don't need to submit their credit or debit card information to a website.

"If identity theft does occur, you know exactly how much you have, and you're not messing up your checking account or credit history of the past 15 years," says Jordan.

With paycards, there's no need to cash paychecks at the bank or grocery store or worry about minimum balances or overdrafts, he adds. Some paycards have extra options like Christmas savings plans, expense reimbursements and advance paychecks.

"It saves on fuel and hassle costs," says Jordan.

Unverferth and Jordan see only one problem with paycards: usage fees.

"It's not for every employee, that's for certain. The downside from an employee standpoint is that there are fees included," says Jordan.

Fees vary depending on the type of paycard, but it may mean ATM fees, transaction fees or a limited number of free transactions. Performance Benefits' product, ReadyFunds, has no monthly fee and users are typically allowed three free transactions, which is at least enough for employees to cash the money from their cards, says Jordan.

"You have to use them properly. If you're not using them properly, then there are fees," he says.