Is Free Checking Ending?

Several years ago, the Federal Government had a good and thorough review of payroll cards.

And since now the Bank of America is getting rid of its free checking accounts because they cannot automatically debit the overdraft charges, it is worth looking at payroll cards again.

Payroll cards, a less costly alternative to paper payroll checks, allow employees to access their pay through various means, depending on the particular product. 

Wages are deposited to the payroll card account via direct deposit, and the employee uses the card to withdraw cash at an ATM or purchase goods and services. 

One of the distinguishing characteristics about bank-issued payroll cards is that they generally are not marketed directly to consumers. 

Instead, banks market the cards to employers, who, in turn, encourage their employees who do not use direct deposit to use a payroll card to receive their wages.

The payroll card is a particular type of stored value (or prepaid) card, a product that streamlines the payment process for purchases or cash withdrawals. A variety of stored value cards exist, including prepaid phone cards, mass transit cards, and prepaid debit cards.

Stored value cards operate in either "closed loop" or "open loop" systems. In the closed loop system, an issuer provides a card that can be used only for its products or at a finite number of merchant locations. 

Mass transit fare cards and college-issued cards that can be used at cafeterias, bookstores, and other campus venues typically have closed-loop systems. In an "open loop" system, cards are accepted beyond the issuer's locations through a more universal network for PIN-based (e.g., STAR) or signature-based (e.g., Visa, MasterCard) transactions. 

Payroll cards use an open loop system, and should probably find there way into most franchisee operator's payroll tools.