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Wal-Mart Employees Going Checkless

Latest in trend toward pre-paid debit cards

By Mark Huffman
ConsumerAffairs.com

September 3, 2009

The change has already started for some employees and will be phased in for the rest over the next few months, the company said.

Wal-Mart said the change will save 257,000 pounds of paper each year by not printing checks. It will also save the company an undisclosed amount of money. The company says about half of its U.S. work force currently receives pay in the form of a check. Money deposited to debit card accounts will be FDIC insured, just like a bank account.

"Electronic payroll is the right choice for our associates, our company and the environment," said Tom Schoewe, executive vice-president and CFO, Wal-Mart Stores, Inc. "It provides our associates with fast, convenient and safe access to their pay. The program's ability to reduce paper usage is right in line with Wal-Mart's commitment to eliminate waste wherever we can."

Wal-Mart's change in policy is bringing new attention to the use of pre-paid debit cards as an alternative to a bank checking account. Though many critics have long dismissed prepaid check or debit cards as a fee-laden waste of money for consumers, competition among issuers has recently produced offerings whose fees are comparable with a bank's checking account.

For example, the monthly service charge for these cards can often be below $5. When users need to write a check, they may do so using online bill pay. And while there is almost always a fee for that, some checking accounts also carry check writing fees.

Probably the biggest advantage a pre-paid card has over a traditional checking account comes when the user overdraws the account. With a traditional checking account, the bank will honor the purchase as a "courtesy," but level a charge of up to $35. With a pre-paid card, a purchase for which there were insufficient funds would be declined. There would be no overdraft, and thus, no overdraft fee.

The Wal-Mart employee card will be a Mastercard administered by First Data Corporation. Wal-Mart says it has negotiated to receive the lowest fees possible. In addition to online banking, the cardholders will also receive a checkbook with which they can write checks.

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