Wal-Mart to Pay Workers with Debit Cards

Discussion
Sep 03, 2009

By George Anderson

Wal-Mart Stores is looking to reduce expenses associated with
payroll checks by paying employees who don’t use direct deposit with a debit
card. About half of the company’s workers currently receive their pay on
paper checks.

According to a Wall Street Journal article,
Wal-Mart believes it can save over 257,000 pounds of paper associated with
check usage. Government agencies are using debit cards to deliver payments
to Social Security recipients and others.

While the use of debit cards is expected to save Wal-Mart money,
there have been concerns raised that workers will be charged fees to use
the cards. MasterCard is working with Wal-Mart Stores and has promised to
offer low fees, including the first ATM transaction per pay period being
free. Using the card after that will be billed at $2 a transaction. Employees
will not be charged fees for withdrawing cash by using their cards at Wal-Mart
registers.

Laura Kelly, senior vice president of global prepaid cards at
MasterCard, told the Journal that
employees will benefit simply by not having “to go to stores to pick up their
paychecks anymore.”

Discussion Questions:
What do you think of Wal-Mart Stores switching to debit cards to pay
workers? Will this become a widespread practice in retailing and related
businesses in the years ahead?

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19 Comments on "Wal-Mart to Pay Workers with Debit Cards"


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Paula Rosenblum
Guest
11 years 8 months ago

Two dollars a transaction??? Really?

While it’s a noble idea to stop wasting the paper associated with checks, it’s somewhat ignoble to push the cost of paying workers back onto the workers themselves.

Isn’t a better solution to help the workers get set up with direct deposit and a checking account?

Len Lewis
Guest
Len Lewis
11 years 8 months ago

You’ve got to be kidding. What happens to the thousands and thousands of Wal-Mart workers who may not have checking accounts? You force them to take debit cards. And what happens when those “low” fees are all of a sudden adjusted upward?

Wal-Mart has worked hard to polish its image and then comes up with this. I can imagine the backlash….

Charlie Moro
Guest
Charlie Moro
11 years 8 months ago

It may cut expenses, but for those people that for some reason do not use a bank or credit union, would lead one to think that payments for things like rent, bus and taxi are a cash transaction…how will those people convert their debit card to usable currency?

Seems misguided, where maybe a better effort may be to identify the real needs of those employees and see how best to give them options.

Max Goldberg
Guest
11 years 8 months ago

Here they go again…Walmart pushes the cost of doing business onto someone else. This time, it’s their employees. Why should employees be charged anything to access their money? Walmart can’t seem to get it right. For every step they take forward to improve their image, they take a giant step back.

David Livingston
Guest
11 years 8 months ago

I don’t see why not. I used to work for F.W. Woolworth and even the managers were paid in cash. What’s the difference? Wal-Mart could save on the plastic by simply paying employees in cash and avoiding an additional transaction.

George Anderson
Guest
11 years 8 months ago

Wal-Mart has said its workers can receive checkbooks to write checks for those who don’t accept the card.

Carol Spieckerman
Guest
11 years 8 months ago

The only people who should be outraged by this are the check-cashing services. They may have to increase their already-usurious fees in order to compensate for the loss of customers. Check-cashing fees vs. debit card fees? No contest! Walmart is presenting options; not mandates.

Cathy Hotka
Guest
11 years 8 months ago

Here’s one more piece of encouragement to Walmart employees to establish a checking account. Anyone who’s struggled with one of those debit cards you get as a rebate from AT&T (retailers won’t take them, the card expires quickly, etc.) knows the potential pitfalls that Walmart employees will face. Perhaps Walmart could offer its people some financial education….

Steve Montgomery
Guest
11 years 8 months ago

There remains a large percentage of the population that is unbanked. Some because they don’t want a paper trail as they undocumented and others simply because they don’t understand the value in having a relationship with a bank.

I think the employees would be better served if as suggested by others already they helped their employees understand the value of having a bank account. Certainly it would be far less expensive than paying $2 per transaction to get access to their pay.

Bryan Larkin
Guest
Bryan Larkin
11 years 8 months ago
First, I think it is interesting that the initiative is couched in “green” terminology of paper savings. One thing that we all have to be concerned about is the use of new buzz words and trends as a smokescreen for a company’s actions. If this is solely about saving paper does it really support the rest of a Corporate Social Responsibility initiative? In other words, is it consistent with a core CSR approach that treats people fairly and all the other non-environmental aspects of CSR, or is it just a green initiative with little regards to CSR as a whole? If employees have multiple options, this may be a good one that will provide a new and–for some–better way to get their money. As some have pointed out, it may be less expensive than cashing payroll checks. And if accessing cash at work is free, that too may be a benefit. This may fit well into a CSR model. Depending on how the cards are used, though, it certainly can provide Wal-Mart and others (Mastercard)… Read more »
Jack Pansegrau
Guest
Jack Pansegrau
11 years 8 months ago
I believe Walmart IS acting responsibly–the first debit of each cycle is free–so any Associate can withdraw the entire sum without the $2 fee. Paying a worker in cash involves a lot more work than an electronic transfer to a debit card so Walmart is saving paper compared to drafting checks and saving time as compared to paying in ‘cash’. And finally, the worker does not need to go to work to get the ‘cash’ or ‘pick up the check’–it is simply deposited electronically. So where’s the problem with this? Oh and least anyone mention it, under the current system, I’m assuming any Walmart Associate without a checking account is PAYING a huge fee to a check cashing firm when they convert it to cash. I believe rates can be as high as $10 per $100! That’s a lot more than the $2 fee discussed, which can be averted if the Associates desires, while a check cashing fee is mandatory if one does not have a checking account. So in my opinion, Walmart is to… Read more »
Bill Hanifin
Guest
11 years 8 months ago

Configuration of prepaid card products of the type being used by Walmart in this program is highly configurable in negotiation between the stored value provider and the customer (Walmart).

That said, there is nothing that would prevent Walmart from restructuring the cards in a more favorable way for its employees.

The current structure will encourage the behavior of going to the ATM and retiring the entire paycheck in first transaction. That’s not good news for the prepaid card provider as transaction fees drive the profitability of the product over time. Burdening the cardholder with fees to make the prepaid model work is not a good long-term business model.

I suggest that the medium of prepaid card is a good one to adopt but that Walmart should consider restructuring the terms of use to bring a true benefit to its employees.

Eliott Olson
Guest
Eliott Olson
11 years 8 months ago

They also can be used as a time card.

Colin Jephson
Guest
Colin Jephson
11 years 8 months ago

There doesn’t seem to be much approval for Wal-Mart’s initiative on this forum! It would probably be much better for them if they approached this softly–perhaps offering an incentive for employees to switch. They could also include the new payment method in employment terms from now on. In very little time the problem would be much reduced.

But I guess that is just not the way they do things…!

Mel Kleiman
Guest
11 years 8 months ago

This is a great idea and I am sure the employees will love it.

1. They will not have to worry about using check cashing services.

2. They will not have to pay bank charges to cash a check since the employees who use the cards will those that are unbanked.

3. They can withdraw all of their money at one time with no charge. (If they got a check and they do not have a bank account, they now have to get all of the cash at one time so this is not an issue.

4. They now will have the flexibility of leaving money on the card if they want to and than getting the cash they want at work with no charge.

Yes I think Wal-Mart could possible get lower fees from Master Card but these is a better deal for the unbanked employee than the present pay system.

Li McClelland
Guest
Li McClelland
11 years 8 months ago
I think we all may be making our (differing) assessments on Walmart’s debit card paycheck strategy without really knowing enough about it to do so. We don’t know what their introductory training on the topic will be, for instance. Those already using direct deposit will be able to continue to do so, and perhaps others will be encouraged to sign up for direct deposit. We don’t know what percentage of employees are already ON direct deposit for whom this change will mean exactly nada. We do know, anecdotally, about the horrible fees and abuses of check cashing services which the debit cards may help to avoid. We can probably only guess at ways the debit card might make life easier and safer for a small segment of the workers. Finally, we aren’t privy to whatever research and employee polling may have gone into arriving at this decision by Walmart. I was gratified that David mentioned having once been paid in cash which allowed me to take a little trip down memory lane. At my first… Read more »
David Harvison
Guest
David Harvison
11 years 8 months ago

This sounds like another entropy problem with the global warming religion. What is the marginal impact on the use of paper money–if more people get the pay in cash withdrawals and the need for cash increases, with the costly paper process used in the increased paper money in circulation offset the paper used to write the checks?

Ed Dennis
Guest
Ed Dennis
11 years 8 months ago

Every Walmart I have ever been in has a bank in it. What is wrong with making arrangements with those banks to allow “free checking accounts and free checks” to all Walmart employees? I am sure the banks would oblige. Now if you want to pay with a debit card then also ask those banks to waive transactions to consumers (Walmart employees) who request cash withdrawals from the cards.

I really don’t see a problem here other than it’s Walmart that is doing this. We all know there are [some] who cast everything Walmart does as evil.

Michele Dalpini
Guest
Michele Dalpini
11 years 8 months ago
I work for a company that has used another “brand” of a loaded debit card for all of our employees. It does take some employees a while to get the hang of it, but the benefits far out-weigh the disadvantages. 1) The employees do not have to wait for a check to be mailed to them…their funds are on the card at 12:01 am payday. So if they are out of town, they still have immediate access to their pay.2) They can take it to a bank, even if they do not have an account there, and remove all of the funds or partial funds.3) Each company makes up their own contract as far as how much cost the company will absorb, and what the employee will have to pay for.4) We have it set so the employees should never have to pay a cent to get their card, unless they abuse the system, and make repeated withdrawals and phone calls, etc.5) They can use it as a debit card where ever that brand of… Read more »
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