Credit Card Debt Management

My local chapter of the Better Business Bureau is strongly encouraging participating businesses to start paying their employees with MasterCard’s Trust Card, an idea that is expected to quickly spread to other BBBs nationwide. So what’s the deal with these plastic cards that look no different from a credit or debit card? They’re hardly a new concept, but they are finally getting significant attention as companies seek to cut costs.

The concept of payroll trust cards (also offered by Visa and several banks) is essentially a way for a person to receive money from another, in real time, without the dangers of carrying cash. There are, however, other risks associated with carrying plastic, like consumer identity and liability protection. When used for employee payroll, the cards often bear the employee’s name, which make it much less risky in the area of identity theft and fraudulent card usage.

The cards enable employers to save a significant amount of money when it comes to payroll costs (total savings of about $114.4 million in 2003). Payroll trust cards are marketed primarily toward employees who don’t have bank account and ATM access, and employees who travel frequently and may miss paydays at the office. Of course, direct deposit is always an option, but many states prevent employers from mandating participation in direct deposit. The costs for employers to use direct deposit are comparable to the costs associated with Payroll trust cards, both significantly cheaper than the cost of writing checks. In the local news story covering the BBB’s initiative, employers tout payroll trust cards’ ability to help employees spend smarter (?) and become more financially independent (?) — not sure how they draw that conclusion.

Interestingly, Visa’s product, called the Spectrum card, is offered as a way for single parents to collect child support in the state of Alabama. The cards are nice because they work just like debit or credit cards at the ATM or at the cash register. Still, I’m a control freak who is leary of any purchase or ATM fees that might be associated (for instance, my bank charges 25 cents per debit transaction). I also have accounts at three different banks and wonder if dealing with a card might make it more of a hassle to manage the flow of my money. I suppose not, as long as the appropriate ATMs are conveniently located. Anyone who has ever dealt with those Visa gift cards knows what I’m talking about — to check your balance, allow about 20 minutes. Oh well, time will tell how these products fare in the marketplace.