Understanding Payroll Card Options: SVC's or Bank Cards

Understanding Payroll Card Options: SVC’s or Bank Cards

In order for employees to participate in our growing, non-cash, transaction-based society and for employers to capitalize on these trends, there needs to be an option that will allow them to leverage the flexibility of electronic fund distribution. Payroll cards address this need head-on for both employees and employers.

There are a couple of offerings from vendors when it comes to payroll cards. The two main offerings can be categorized as either stored value cards (SVCs) or bank cards. Get information about outsourcing benefits on https://www.bluesilverwealth.com/top-5-benefits-of-outsourcing/

First, let’s explore a stored value card. Just as it sounds, it holds a stored value of funds that has been associated with the card. Once loaded, or associated with a pre-determined dollar value, the card can be used to make withdrawals from ATMs. To better understand this option, let’s look at the setup. The employer sets up one major account with the bank and each employee has access to what is referred to as a sub-account under that one major account.

Understanding Payroll Card Options: SVC's or Bank Cards

With SVCs, the employer directs funds through the major account and each sub-account, and then maintains the balance for each individual employee. The employee does not actually own the sub-account; they only withdraw funds from that account. The employee is not able to participate in point-of-sale or retail transactions as one would with a true debit card or bankcard. Although the major account is FDIC insured, the sub-accounts are not individually insured. For example, the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $100,000.00. That means that if there are 100 sub-accounts for the one major account, each one is only insured for $1,000.00. The employee does not have much protection in the event the issuing or sponsoring bank fails. Also, most SVCs do not provide protections under Regulation E, which provides provisions for fund replacement in the event of lost or stolen cards. VISA branded cards, i.e. bank cards, and offer zero-liability policies.

Bank cards are similar to SVCs in that each is loaded with a pre-determined dollar value and can be used for withdrawals from ATMs. There are, however, dramatic differences between these two types of cards. First, with a bank card the employee is able to participate in any point-of-sale or retail transaction as one would with a true debit card or bank card. Second, the employer sets up an actual account with the bank for each employee who then has access to the account itself whereas with a SVC, the employee is accessing a sub-account under a major account. The employer is responsible for directing funds to the individual account. Third, the employee actually owns the account and is able to build a credit history based on their use of the account which may lead to a greater level of financial independence. Finally, the individual account deposit is FDIC insured up to $100,000.00 and the employee can enjoy the protections issued under Regulation E.