The bank fees are small: a couple of bucks for using the wrong ATM, a dollar-fifty for transferring money between accounts. But when those fees are inescapable, they become a problem. And when they're levied on the lowest wage-earners, the effect is far greater than it might be to you.
What's at issue are paycheck cards, essentially debit cards that are refilled by some employers each pay period. The New York Times looked at the recent growth in use of the cards on its front page Monday. It's understandable that the cards would become more common — for two of the three parties involved, they're a pretty good deal. Employers can save on processing fees when distributing salaries. Banks make up a lot of the small fees that were targeted after the recession. The problem is that those small fees add up for the third participant, the employee. And those employees don't have any choice.
Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald’s in Milwaukee, says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.
“It’s pretty bad,” he said. “There’s a fee for literally everything you do.”
The Times articulates some of the fees assessed by a company called NetSpend: "$2.25 for out-of-network A.T.M. withdrawals, 50 cents for balance inquiries via a representative, 50 cents for a purchase using the card, $5 for statement reprints, $10 to close an account, $25 for a balance-protection program and $7.50 after 60 days of inactivity." For the employer, it's all savings. This handy tool from Visa lets you calculate how much a business can save by moving your employees over to the cards. If you have 50 employees paid weekly, you could save $4,300 a year.
The key context comes from Bintou Kamara, who works a retail job in New York and pays $1.50 to transfer from her work card to her bank account. "I just make such little money that it seems like a lot to pay just to get access to it." Which gets back to our first point. If you make $7.25 an hour, paying $40 a month in fees just to get access to your salary is 3.45 percent of everything you earn. Forty dollars may not seem like a lot to you, but it is to Kamara and Yates.
The Times also ran stories this weekend about the growth in CEO salaries and the continued use of "golden parachutes," massive payouts to fired executives. We took four examples of people making more than minimum wage and calculated how much those fees would be if they reflected the same percentage of their salaries.
|Minimum wage||Oracle CEO Larry Ellison||Parachute recipient James Mulva*||Barack Obama||John Boehner|
|Each ATM use:||$2.25||$15,549.57||$25,199.35||$36.13||$8.89|
|Fee for six inactive months:||$7.50||$51,831.90||$83,997.84||$120.42||$29.63|
|To close account:||$10||$69,109.20||$111,997.13||$160.56||$39.51|
* This isn't a direct analogy. James Mulva got about $156 when he left ConocoPhillips, which isn't a salary. But for illustrative purposes, it's interesting.
The amount some of these low-wage workers pay in fees each month would be like Larry Ellison paying over $275,000 to his bank. It's as if Barack Obama had to pay eight dollars every time he used his work-issued debit card.
We can do the comparison one better. Enter your salary below (we don't store this info or anything, of course) and see how much you'd be paying in fees and costs if you paid at the same rate as the paycheck card employees.
The amounts seem trivial. But if you had to pay that much each time you made any purchase from the bank card that your employer forced you to use, you'd probably be frustrated, too. And if you live in Virginia, you may get to know that frustration anyway: the state recently switched its tax income refunds to a similar debit-car system.