Common sense tells us that if you want a well-built home, you must build on a solid foundation. The same holds true for building a strong financial future. It begins with establishing a solid foundation, such as having a checking and savings account. Still, this can be an overwhelming challenge for many Americans, who do not have access to a traditional banking relationship, or even the most basic financial services.
According to a 2011 Federal Deposit Insurance Corporation (FDIC) study on underserved households, almost 30 percent of U.S. households do not have a basic savings account. The study also found that Hispanic households represent the second highest number of unbanked households at 20.1 percent, falling just behind African-Americans at 21.4 percent. These numbers are alarmingly high and illustrate the need for greater financial empowerment and inclusion to help more Americans control their financial futures.
Most workers with established credit and banking services receive their wages via direct deposit, so that their wages are credited to their bank account. For workers without bank accounts, however, this is not an option. For these individuals, payroll cards can play an important role because they provide some of the same benefits and protections that traditional banking relationships offer, while bringing them into the formal financial system.
Unbanked workers benefit greatly from electronic wage payment programs that deliver their wages directly to a prepaid payroll card, providing them with instant, secure, and convenient access to their money. While payroll cards offer discretionary services that may incur fees, workers are guaranteed at least one free withdrawal of wages, in full, per pay period. At a minimum, unbanked workers can treat their payroll card like a paycheck on payday and cash it to the penny without paying a fee.
Payroll cards also offer consumers important security protections since the cards are issued by a financial institution and are subject to strict federal and state consumer protection laws. In addition, payroll cards eliminate the need for carrying large amounts of cash that can be lost or stolen.
But payroll cards are more than just a plastic paycheck - they give workers access to things many of us take for granted. Payroll cards can be used to order things online, book hotel rooms, and even pay bills. Payroll cards aren't just a more convenient and safer way for workers to access their wages, they enable unbanked workers and their families to participate in the economy, in ways they haven't been able to before.
Payroll cards offer those with no banking access a dependable option for protecting their finances. Empowering our citizens with this much needed access, security, and convenience of prepaid payroll cards allows the unbanked to save more of what they earn and helps them build a solid financial foundation. And, as more of our citizens gain that solid financial footing, we can ultimately get our economy healthy again.
Javier Palomarez is President & CEO of the United States Hispanic Chamber of Commerce.