College students aren’t the best at managing the little money they have, so parents often provide them with some kind of allowance. But is there any way for them to really know how their kids are spending the dough? Yes, PayCards. PayCards aren’t a new invention, but employers and software vendors are starting to look at them in a new light and targeting a new market for their use. Traditionally, payroll services providers like CompuPay and Ceridian touted—and are still touting—these cards as beneficial to employees who don’t have bank accounts. Up to 25 percent of the working population in this country does not have a bank account, according to the American Payroll Association, and these products serve as debit cards that are loaded with a person’s paycheck amount each period, preventing them from having to head to the check-cashing store. Monthly fees for the cards potentially can be 60 percent less than those establishments charge and employees don’t need to undergo a credit check to receive these cards, which they can use for purchases, cash withdrawals or paying bills. But studies indicate that many of these so-called “unbanked” workers come from other countries and that beyond a lack of established credit or inability to pay checking account fees, they choose not to open accounts because they don’t trust such institutions to hold their money or they feel uncomfortable providing them with their financial information. So why would they trust anyone to hold their same money on a plastic card instead of in a vault? Valid point, admitted Karl Grass, senior vice president and general manager of Employer Solutions for Sage Software, during Sage’s customer conference in Chicago last week when the vendor introduced Sage Payroll PayCards. And an issue about which companies themselves will have to educate their employees, he said. Popularity of these cards increasingly is found among the banked workers trying to manage their budgets and divide funds between their mortgages, family vacations and college kids’ allowances, Grass said. Employees with bank accounts can allocate a certain percentage of their salary to their direct deposits and then have one or more cards filled with another percentage. When I attended college, I owned a student debit card, which contained a certain amount of money for me to spend on items in roughly a dozen university stores. According to the California Research Bureau, the concept was invented in the early 1970s, when students could use Stored Value Cards to purchase meals, books and other college-related items on campus. But as was the case with my alma mater, the purchases were restricted to certain university stores, not to mention the items were often overpriced. PayCards work more like Visa gift cards that are accepted most places credit cards are accepted, therefore giving students more choices of where to shop. Of course, parents don’t want to give their kids too many choices. If students use these cards instead of cash, their parents can track their purchases online and stay on top of where their money is going. Not that they shouldn’t trust them … After all, no one would think to buy beer with a PayCard. Would they?
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