USD INR ₹ 83.33
GBP INR ₹ 106.12
CAD INR ₹ 60.88
Articles

What is an ACH Transfer?

Updated on July 07, 2022 11:27 am
person clicking ach button on keyboard

Modern consumers have a wide range of alternatives for sending or receiving payments. One of the frequent ways to move money online between bank accounts is through an ACH (automated clearing house) transfer.

It's possible that you already use ACH bank transfers without even being aware of it. Through ACH transfers, you can, for instance, pay your bills online using your bank accounts, have your paycheck deposited straight into your account, receive government benefits, or send an electronic check to pay a business.

Whether or not you have used ACH, it is a low-cost alternative for online money transfers that are rising in popularity in the United States. It is something worth knowing about.

Continue reading to learn everything there is to know about ACH transfers, including their advantages and disadvantages, what money transfer services provide international ACH transfers, and how to do an ACH transfer for a low-cost and secure international money transfer.

What Is An ACH Transfer?

An ACH transfer is a type of electronic bank-to-bank transfer that takes place over the Automated Clearing House Network.

The Automated Clearing House Network is a system for electronic money transfers between bank accounts throughout the United States. The network is managed by Nacha, a 1974-founded company that was formerly known as the National Automated Clearing House Association (NACHA).

All U.S. financial institutions are linked through the ACH network, which was developed to transfer money and information between bank accounts safely and quickly.

Nacha claims that the ACH network is a batch processing system used by banks and other financial institutions to combine these transactions for processing.

The Automated Clearing House receives ACH withdrawal and deposit requests in batches from banks and businesses throughout America each day at predetermined intervals. The credit or debit transaction requests are then sent out by the Clearing House, usually the next day.

Consumers frequently use ACH transfers for things like direct deposit of paychecks, automatic bill payments, MOTO (mail order, telephone order), government benefit programs, P2P and B2B payments, and direct debit transactions.

Many transfer services, including banks, Zelle, and third-party applications like PayPal and Venmo use the ACH network for sending money to friends and family.

ACH transfers are becoming more and more common. Nacha estimates that in 2021, there were 29.1 billion payments totaling $72.6 trillion, an increase of more than 17% from the previous year. The number of transactions between individuals and businesses also climbed, reaching 271 million (24.9%) and 5.3 billion (+21%), respectively, within the same time frame.

Types of ACH Transfers

There are two main types of ACH transactions:

  • Direct Deposits
  • Direct Payments 

You receive money with ACH direct deposits. While you can send money with ACH direct payments.

ACH Direct Deposit

An electronic transfer from a company or the government to a customer is known as an ACH direct deposit. 

ACH direct deposit is frequently used for payroll, government benefits, employer-reimbursed costs, tax refunds, annuity payments, interest payments, and other payments.

ACH Direct Payment

An ACH direct payment refers to money transfers made electronically for payment purposes by both businesses and people. For instance, using your bank account to pay a bill online. You can send money to your friends and family via payment apps like Venmo and Zelle, which leverage the ACH network.

During an ACH direct payment transfer, the sender sees an ACH debit in their bank account. The recipient sees the payment as an ACH credit in their bank account. There are ACH credit transfers and ACH debit transfers within the direct payment category.

The fundamental distinction between the two is how the funds are transferred between accounts, either "pulling" or "pushing."

ACH Debit pulls money from an account. For instance, when you set up recurring bill payments, the business you are paying might take the money it is owed each month from your account (with your authorization).

ACH Credit pushes money from one bank to another, either into your account or the accounts of your friends and family. In other words, the customers are in charge of starting any money transfers that involve 'pushing' money from their accounts to someone else's account.

How Long Does an ACH Transfer Take?

The processing of ACH transactions occurs in batches, is almost entirely automated, and frequently takes place overnight through a central body. From there, the requests are distributed to institutions all around the United States. It can take a single day to several. But more people are starting to use same-day ACH transfers.

Difference Between ACH Transfers and Wire Transfers

Wire transfers and ACH transfers move funds from one bank account to another. They are not, however, the same. There are differences in speed, cost, and security, along with how the transfer is done.

ACH transfers are mainly used for domestic transfers. However, international ACH transfers are becoming popular. Whereas wire transfers can be used for both domestic and international transfers.

Usually, wire transfers take place on the same day. Since the money is transferred manually, under the supervision of bank staff, it takes place right away. When sending money by wire transfer, the bank acts as the direct mediator between account holders.

The transfer is made over a slightly longer path with an ACH transfer. It can take several business days to complete.

While ACH transfers usually take 1-2 business days to clear a bank account, domestic wire transfers are executed virtually quickly. 

The disadvantage of speedier delivery is that once a wire transfer has been initiated, it cannot be stopped. As a result, it is typically seen as less secure than ACH.

ACH transfers are usually free or very low cost. However, wire transfers come with higher fees-be they domestic or international.

Although ACH transfers are not the quickest method of moving money, they are safe and affordable.

ACH vs. Wire Transfers

FeaturesACH TransfersWire Transfers
Domestic & International Payments Mainly handles domestic transfers. But International ACH transfers are available.Both domestic and international transfers. International transfers are done via the SWIFT network
Fees to Send Money Are typically free, or under $3 per transaction$10-$50 
Fees to Receive MoneyFreeSome banks may charge around $35 to receive international transfers 
Speed1-2 business days for domestic ACH transfers

Domestic wires: within hours.

International wires: 1-5 business days 

 

 

 

 

 

 

 

 

 

Pros and Cons of ACH Transfers

Advantages of ACH Transfers

Using ACH transfers offers several advantages:

  • Let's start with convenience - with ACH transfers, you may automate bill payments and other regular monthly costs to save time and money.
  • Depending on where you bank and the type of transfer, ACH transfers are typically free. Compared to wire transfers, it is more affordable.
  • Even though wire transfers are quicker than ACH transfers and are frequently utilized for same-day service, they can occasionally take more time to process, particularly with international wire transfers, which can take several business days to send money from one account to another.
  • ACH transfers can be quick. The ACH network typically settles a transaction from one bank to another the next day after it is initiated. According to Nacha operating guidelines, credits must settle within one to two business days, and debits must settle the next business day.
  • It is easier to use than sending or writing a check or paying a bill using a credit or debit card.
  • An ACH transaction can be more secure than other forms of payment.

Disadvantages of ACH Transfers

Although practical, ACH transfers are not always ideal. There may be drawbacks that should be considered.

  • You may be restricted in how much you can send on a daily, monthly, weekly, and per-transaction basis.
  • There are cutoff times. An ACH transfer that is started after the bank's cutoff time may take longer to complete. For instance, processing might not begin if you transfer money on a Friday until the following Monday. This may be a problem if you are trying to meet a bill's due date to avoid paying a late fee.
  • There used to be a six-per-month cap on certain types of withdrawals and transfers from savings accounts. Even though this is no longer the case, several banks still impose a withdrawal fee for transactions that exceed six each month. The bank may change your savings account to a checking account if frequent withdrawals from savings become routine.
  • When making an ACH transfer, there can be fees if there are not enough funds in your account.
  • ACH transfers are primarily utilized domestically and only within the United States. International transfers are generally prohibited by banks. Only a few US banks have a mechanism in place that can offer international ACH transfers to most US-based customers.

Information Required To Make An ACH Transfer

Basic details needed to perform ACH transfers are as follows: 

  • The name of the account holder,
  • Account number,
  • Bank routing number also known as ABA number,
  • IBAN (International Bank Account) number,
  • SWIFT (Society for Worldwide Interbank Financial Telecommunications) code,
  • And the transfer amount.

Throughout much of Europe, IBAN numbers are used for international bank routing. ABA numbers are unique to the United States exclusively. IBAN numbers are not used by the United States for international banking. American banks, however, employ SWIFT codes.

What Is an International ACH Transfer? Is It Different From International ACH Transactions (IAT)?

An ACH transfer that involves a financial institution beyond the U.S.'s borders is known as an international or global ACH transfer. Nacha also controls these transfers.

A global ACH involved the direct deposit of funds into an overseas bank account via a clearing house, in this case, Nacha in the United States. 

The Single Euro Payments Area serves as the clearinghouse throughout Europe (SEPA). Australia's ACH system is known as Direct Entry. Different systems exist in other nations to receive these payments.

The point is that there isn't an official international framework in place for each nation to handle transactions through the ACH system. This kind of payment is not accepted everywhere in the world. When a cleaning mechanism is not present, they have their system in place.

International ACH Transaction (IAT) is mainly concerned with monitoring and reporting global transactions. IAT is not a means for moving money. An IAT is established by Nacha as an extension of an ACH.

Nacha mandates the IAT format for all ACH transfers coming in and going out of the U.S. to ensure that all cross-border payments comply with OFAC (Office of Foreign Assets Control). No retail consumers are involved in this procedure.

If you find a bank offering IATs, it does not necessarily signify that they provide international ACH to individual clients but rather that they adhere to legal reporting obligations.

How to Do an ACH Transfers to Send Money Abroad?

Global/international ACH transactions are only available to the general public through a select few institutions, as was already mentioned. 

While technically viable today, international ACH transactions are still not frequently accepted. It is not as simple as walking into your bank and ordering one. Most banks prefer to offer customers international wire transfers. 

Check with several banks to see whether they offer international ACH transfers. Additionally, check to determine if international payments' costs and delivery times are competitive.

There is good news, though. There are ways to send an ACH transfer with banks that will send money overseas. 

You can do it by using intermediary money transfer services like Wise, XE money transfer, Instarem, Remitly, and State Bank of India (California). These money transfer businesses offer ACH bank debit as one of the payment options to fund your international money transfer.

Steps to make an international money transfer:

  • Sign up with one of the money transfer companies (either on the web or using their money transfer apps). Follow the instructions on the screen. 
  • Give the necessary transaction information (your and recipient's information, including bank details and others). 
  • Verify the exchange rates and the fees, then select ACH Bank debit as your payment option and press send. 
  • You can relax and leave the rest to the money transfer service provider.

Use the ACH system to send money overseas instead of paying exorbitant international wire transfer fees. Make sure you have enough money in your account to cover the debit until it occurs.

Compare money transfer services offering ACH payment options using the CompareRemit online comparison tool today!

 11976 views
Rate article:
(0.0)
 
 
Money Transfer FAQ's
Related Articles
Travel Insurance
How to Save on Travel Insurance (2024)

Travel insurance is an essential aspect of trip planning, providing financial protection against unforeseen events such as trip cancellations, medical emergencies, and lost luggage. However, finding the right travel insurance plan at an affordable price can sometimes be challenging. In this comprehensive guide, we'll explore strategies to help you save money on travel insurance without compromising on coverage or quality. Understanding Travel InsuranceBefore diving into ways to save money on travel insurance, it's crucial to understand what travel insurance entails. Travel insurance typically offers coverage for various aspects of your trip, including trip cancellation or interruption, emergency medical expenses, baggage loss or delay, and travel assistance services. By purchasing travel insurance, travelers can mitigate financial risks associated with unforeseen events during their journey.Why Some Plans Cost More Than OthersThe cost of travel insurance can vary depending on several factors, including:Coverage Options: Comprehensive plans that offer extensive coverage for emergency medical events during one’s travels tend to command higher premiums than limited coverage plans, but offer more overall benefits and protection.Destination: Traveling to countries with higher healthcare costs or greater risks of natural disasters may result in higher premiums.Medical Costs: The cost of travel insurance is closely tied to the healthcare expenses in the destination country. Countries with higher medical costs often have correspondingly higher insurance premiums.Trip Duration: Longer trips typically incur higher insurance premiums due to increased exposure to potential risks.Age: Older travelers may face higher premiums due to increased health risks and potential for pre-existing medical conditions.Coverage Limits: Plans with higher coverage limits and lower deductibles may have higher premiums.Add-Ons and Optional Coverage: Additional coverage options such as adventure sports coverage, rental car protection, or cancel for any reason (CFAR) coverage can increase the cost of insurance.Tips for Securing Affordable Travel InsuranceIf you are apprehensive about giving away your money on travel insurance, there are many ways to cut down on the cost of the insurance plan.Here are some tips to save money on your travel insurance plan.Compare PlansConduct thorough research and compare quotes from multiple insurance providers to find the most suitable plan at the best rate.Utilize online comparison tools to evaluate coverage options, premiums, and exclusions across multiple plans. Websites like VisitorsCoverage allow you to compare prices and coverage options from various insurers, allowing you to make an informed decision for your needs.As shown here, comparison sites, like VisitorsCoverage, allow you to compare and contrast various travel insurance plans based on your custom needs. You can customize the plans available to you by specifying your coverage amount, plan features–including COVID-19 coverage and pre-existing conditions coverage–available, and additional coverage options.If you are considering visiting multiple comparison sites, let us save you the hassle. Insurance prices are regulated. This means that the same plan with all conditions remaining constant will not have a lower price at other agents, travel insurance aggregators, the insurance company issuing the plan, or any other source.However, similar plans by different companies may have a price differentiation depending on the customizations you enter, hence it is critical to evaluate inclusions and exclusions in the policies.Only Buy Coverage You NeedDon’t pay for coverage you don’t need. It is vital that you customize your plan to get the most specific coverage for you. Luckily, modern-day comparison tools and insurance providers allow us to do just that. When purchasing your policy, a big money saver can be avoiding purchasing unnecessary add-ons or upgrades that may inflate the cost of your policy. Assess your travel needs and opt for coverage that aligns with your specific requirements.It is important to know what exactly your travel insurance plan entails and what it covers. Make a list of things that you need to be covered depending on the types of trips you will be taking and if there are any specific medical conditions that may need attention.The details are always in the fine print. Don't just look at the premium value, read the policy document for inclusions and exclusions in the plan. In the long term, this will save you money and trouble.However, there is a strong caveat to this. While opting for the cheapest plan may seem cost-effective initially, inadequate coverage could lead to significant expenses in the event of a claim. Should you run into an emergency that is not covered, you will have to pay out of pocket. At the end of the day, the cheaper plan may end up costing a whole lot more. Read policy documents thoroughly to understand coverage details and exclusions before making a decision.Bypass Travel Site OffersWhen booking flights or accommodations, you may encounter offers to purchase travel insurance directly from the booking site. Skip the checkbox for travel insurance on these booking sites. These plans often come with commissions and may not provide tailored coverage. For optimal savings and personalized coverage, opt for a separate plan from reputable insurers.Sometimes, these add-on plans might seem like a good deal. However, keep in mind that, many times, these plans try to be a one size fits all solution. The amount of premium will vary depending on who is buying the plan. For example, an older person traveling with medical issues will pay more premium than a young person traveling with no medical issues. Using a “one size fits all” option may lead to a situation where you have to pay out of pocket in the case of an uncovered medical emergency. Use Your Credit Card Travel InsuranceFor those looking for trip insurance rather than travel medical insurance, there is a great option you may already be accessing without realizing. Some credit cards offer complimentary travel insurance benefits, such as trip cancellation, trip interruption coverage, and baggage delay protection. Cards such as Chase Sapphire Reserve are well known for their comprehensive travel insurance coverage. Review your credit card's terms and conditions to understand the extent of coverage provided and consider leveraging these benefits as a supplement to your travel insurance plan.You could always use travel protection offered by your card as a top-up to another policy that covers the emergency medical expenses. There is no reason to spend extra money on trip insurance when you are getting the benefits as a cardholder.Utilize Review WebsitesExplore review websites and rating platforms to gain insights into the products and services offered by leading travel insurance companies. Reading reviews can help you make informed decisions and ensure you receive excellent customer service.There are several review websites and rating websites such as VisitorInsuranceReviews.com, Trustpilot where you can read in-depth on the products and services offered by leading travel medical insurance companies.It is also important that you have access to excellent customer service from your insurance providers to get the best value for your money. Even if you save a few dollars in insurance costs but face unresponsive customer service for hours on end, the situation gets more costly.VisitorsCoverage is a one-stop shop for travel issuance which also offers an award-winning, industry-leading customer service team. They also offer AI-based customer support for those wanting quick and easy help. You can get in touch with the call team via WhatsApp messages and email. Or call them using their toll-free line number: 1-866-384-9104.Evaluate Optional Riders Such As “Cancel For Any Reason”"Cancel for Any Reason" is an upgrade option that lets you cancel a trip for any reason for 40%-75% of your insured trip costs. This option can help you save a lot of money should you run into a reason your trip is canceled. While these riders offer added flexibility, they also come with additional costs that may not be worthwhile for every traveler. But you have to pay extra to include it in your plan.Insurance companies usually have a list of the covered reasons in “Cancel For Any Reason” trip insurance. These include terrorism, natural calamities, traffic accidents, and more. If it is not listed, it will not be covered.Sift through the list with a fine toothed comb to see which scenarios are covered. Most travelers find their trip cancellation reasons covered. If you don't need the optional "Cancel for any reason", don't add it.Some plans have promotional offers that may include this coverage if you purchased the plan within a certain time frame. Make sure to check for any promotions and offers like this. Consider Annual Multi-Trip PlansFor frequent travelers, annual multi-trip insurance plans offer significant savings compared to single-trip plans. With coverage extending for an entire year, these plans provide convenience and cost-effectiveness for individuals who travel overseas multiple times a year.Avoid Insuring Refundable CostsIf your travel expenses, such as airfare or hotel bookings, are refundable, there's no need to purchase insurance for them. If you insure a refundable cost and try to seek reimbursement in the event of cancellations, you will need to show proof that certain prepaid costs were non-refundable or your claim will be denied. Instead, focus on insuring non-refundable expenses to minimize coverage redundancy and reduce premiums. This will reduce the coverage and lessen the premium of the travel insurance that you plan to purchase. It is cost-effective to know which trips need to be insured and when you don't need a policy in the first place.While the prospect of traveling without insurance can be daunting, finding affordable travel insurance doesn't have to be. By following these practical tips and strategies, you can secure comprehensive coverage without breaking the bank. Remember, investing in travel insurance is an investment in peace of mind, ensuring that you're financially protected against the unexpected twists and turns of travel. Safe travels!Get Quote And Save On Travel Insurance

eseva
Sending Money To Nepal: eSewa International Money Transfer Service

Growth in digital remittances can be a game-changer in international remittances, mainly in terms of reducing the cost of global money transfer, increasing accessibility, and being more customer-centric. In the case of Nepal, which is one of the highest recipients of remittances in the world, youth are leading the mobile and digital revolution in the country. 50% of the users of eSewa, Nepal's most prominent digital wallet, are between the age of 18 to 30 years. With eSewa, users can make various payments such as pay utility bills, pay internal bills, recharge phones, book airline, and bus tickets, scan and pay to merchants, make a bank transfer (from eSewa to a bank account), and so on. There are also cashback and reward points upon registration. Established in the year 2019, eSewa Money Transfer is affiliated with F1Soft Group. With 15 million users (almost half of the country's population), F1Soft has been the leading fintech company in Nepal since 2004. eSewa is licensed by Nepal Rastra Bank under foreign exchange regulation, so it is a safe and highly regulated mode of money transfer. It offers traditional brick-and-mortar and agent-based remittance services along with the non-traditional digital modes of remittance.Money Transfer Services from the U.S. to Nepal with eSewa eSewa is partnered with various leading money transfer companies such as MoneyGram, WorldRemit, Remitly, Skrill Money Transfer, TerraPay, WireBarley, enabling customers from the U.S. to send money to friends and family in Nepal directly into the recipient's bank account or eSewa wallet.The account deposit service is available in more than 65 banks in Nepal. With more than 4.2 million registered eSewa wallet users, the addition of remittance service to eSewa wallet will provide a boost in remittance inflow to Nepal.Remittances to Nepal constitute a major portion of the country's foreign exchange reserve, surpassing both the official development assistance and the total foreign direct investment. In 2019, Nepali migrant workers sent home $8.64 billion which constituted 25.4% of the country's GDP. Sending Large Amount of Money from the U.S. to NepalThe U.S. to Nepal money transfer corridor is a thriving one, with many money transfer operators competing for business. Here are the top 5 money transfer service providers from the U.S. to Nepal.XoomPayPal-owned Xoom, a leading digital money transfer provider is one of the fastest, secure and convenient ways to send money from the U.S. to Nepal. The Xoom mobile app or website allows users in the U.S. to send money in an instant to friends and family in Nepal using their U.S. bank account, debit card, or credit card. Xoom has partnered with major banks in Nepal - Everest Bank Ltd., Nabil Bank, Himalayan Bank, Nepal SBI Bank, and others offering instant bank deposits. The money can be transferred to a bank account or picked up from an agent location (from over 4000 cash pickup locations) in Nepal. The maximum transfer amount is $9,000 per transfer when using Xoom transfer. The transfer fee varies depending on the method. Bank transfers are usually free of cost. Fees for payments by card are percentage-based.Do keep in mind that a margin is added to the exchange rate when converting U.S. dollars (USD) into Nepalese rupees (NPR).Wise (formerly known as TransferWise)Wise (Ex-TransferWise) is a London-based financial technology company regulated by (Financial Conduct Authority) FCA in the UK. For online money transfers from the U.S. to Nepal, Wise is a secure, fast, and low-cost option. There are no hidden charges, no marked-up exchange rate. Wise gives you the interbank exchange rate for your transfers. You can pay by direct debit, bank transfer, debit card, or credit card. Bank debit or ACH is the cheapest followed by bank transfer. While payment via credit cards has more fees. Depending on the transfers, the money can be reached in one day or even within seconds. There are limits to how much you can send to Nepal. For larger transfers, Wise might ask you to provide your ID card. To initiate the transfer process, sign up online or in Wise's app for free.WorldRemitWith WorldRemit, Nepalese immigrants in the U.S. can send money online to recipients in Nepal. The money can be received via cash pickup, bank deposits, mobile money, and even airtime top-up.The cask can be pick-up from thousands of Samsara, NIC Asia, and Citizen Bank locations within minutes. The bank transfer may take 1 business day.You can send up to $5,000 per transfer with bank transfer and up to NPR 300,000 with the cash pick-up option. A maximum amount of NPR 1,000,000 can be sent in a day. The transfer fee will depend on the transfer amount. WorldRemit adds a margin to the exchange rate.Muncha Money TransferMuncha money transfer lets you send money to Nepal from all the 50 states in the U.S. It is a preferred choice for many NRN (Non-resident Nepalese) as an online payment gateway. Muncha Money Money Transfer and ThamelRemit are popular ways of sending money.An individual with a U.S. bank account can transfer money to the recipient's bank account in Nepal. It takes about 48 hours to complete the transfer. It is licensed by Nepal Rastra Bank, so your money is safe and protected. It offers ACH transfer and can send up to $10,000 per transaction from the U.S. to Nepal. The first transaction is free for all customers.ThamelRemitThamelRemit is an online money transfer platform for sending money from the U.S. to Nepal. It is trusted by more than 50,000 Nepalese in the U.S.The platform is supported by Siddhartha Bank Ltd., one of the fast-emerging banks in Nepal, and is powered by MachNet.The transfer is carried out via ACH where money is directly debited in USD from your bank account in the U.S. and transferred to the recipient's bank account in Nepal in NPR. There is no charge or bank processing fee within Kathmandu Valley.Outside Kathmandu Valley, there may be a bank processing fee that is deducted from the recipient's bank account as per the particular bank's rules and regulations.  The exchange rates offered are highly competitive and fees are affordable. You can send up to $10,000 per transaction and get the money deposited into the destination account in 48 hours.TakeawayThanks to the increasing number of users of digital payment platforms like eSewa and others, the cashless transaction is becoming a reality in Nepal.The above list is not an exhaustive list of all the services available to send money from the U.S. to Nepal. It can be difficult to choose one from a plethora of options. Before you make the transfer, compare the money transfer service providers to get the best value for your money while sending money from the U.S. to Nepal.Nepalese living abroad prefer to send remittances directly through mobile banking, internet banking, or digital wallet. It offers ease of use, convenience, lower cost, and a competitive marketplace of the money transfer industry that gives better service and better exchange rates.

hands holding up payday sign
Everything You Need to Know About Paycard

How do you pay your employees? As an employer, paying your employees is an important part of your business. Direct deposit to your employee's bank account or issuing paper checks are two of the most common ways of compensating them. Gone are the days when employees used to get paid in cash.But what happens when some employees have no bank accounts? This is where paycards come in. Paycards for employees are an alternative option when the employees do not own a bank account, and the employers do not want to pay in hard cash.It is estimated that about 5.4% of U.S. households (approximately 7.1 million) were "unbanked" in 2019, according to the U.S. Federal Deposit Insurance Corporation (FDCI). An unbanked household means no one in the household had a checking or savings account at a bank or a credit union.For small businesses with employees with no bank accounts, paycards can be a convenient option as a payment option.Direct deposit and paycards both offer the benefit of a paperless payroll distribution process and allow the employer to electronically transfer funds conveniently. While direct deposit is the norm for many businesses, paycards are gaining popularity each year.There are pros and cons of using paycards, and in this blog, we will discuss if paycards are right for your business and employees.What is a Paycard?Paycard is a lot like a prepaid debit card as it is made of plastic and can be pre-loaded. In the case of a paycard, the money loaded comes from the employer in the form of an employee's pay. The card carries the issuer name such as MasterCard, Visa, or Discover.Are Paycards Good, and Who is it For?A pay card can be used to pay an employee who does not have a bank account. Paycard holders or employees can cash out from paycards at a bank, ATM, or other point-of-service locations.Employees can also pay bills over the phone using their paycard number or authorize electronic bill payments to specified companies.Employees can use paycards at any merchant, grocery store, retail shop, or gas station that accepts debit cards.Do Paycards Have Fees?By law, employees must be able to access their wages in full without any fees. They can obtain the cash at a bank teller, ATMs associated with the card issuer, pay bills by telephone, or use the card for point-of-sale purchases.However, there may be fees for electronic fund transfers or for cash withdrawals at ATMs that are not in the issuer's network. There may be fees for card replacements, balance inquiries, inactivity fees, or other reasons. The Consumer Financial Protection Bureau issued a rule in April 2019 that paycard issuers must disclose all the fees to cardholders.Employees must be informed of the potential fees. The paycard issuer is required to give you disclosures on such fees before you sign up for a paycard or a payroll card.Also, paycards are regulated by state laws, so you might have to check for additional details depending on your state. Some states are making efforts to reduce fees that affect employees.As you can see, paycards fees mostly affect employees. In the case of direct deposits, employers are the ones who have to pay fees for setting up the payroll distribution system and a transaction fee for each time they transfer wages into an employee's account. The payroll software may also charge a fee for their service.Can Employers Save Money When Using Paycards?Since paycards are reloadable cards, employers can have the banks reload the paycards with their employees' wages for the pay period, avoiding the costs and hassle of issuing paper checks, mailing them, or re-issuing lost checks. The savings may not be a substantial amount but they can add up gradually.Can Employers Choose between Direct Deposit and Paycards?While there is no mandate that employers can only offer either direct deposit or paycards to their employees for their wages, it is safe to check with your state's law on payroll distribution.One-third of states allow employers to require employees to have bank accounts for direct deposit. In such a case, paycards may not be needed. Also, there is no law preventing employees with bank accounts to opt for paycards as their payment option.Though generally, employees tend to prefer direct deposit because of its efficiency and the least costly method of payment, as a business owner or an employer, it is better to give options instead of imposing only one method.Ask your employees about their preferred method of payment and what benefits (convenience, low fees, etc.) serve them the best.In fact, Federal law requires employers to offer alternative payment methods like paper checks or direct deposits.Should Employer Provide Pay Stub?Pay stub provides details of the employees' pay for each pay period. Employers are not required by federal law to give employees their pay stubs. However, many states have laws that require some form of written pay statement.Even if your state doesn't need you to provide pay stubs, you are still required by the Fair Labour Standards Act to keep track of your employees' working hours.For employees, a pay stub gives a record of their wages, deductions, contributions, and other information. It is also proof of income or employment, which is often needed when applying for a loan, credit card, or housing.For employers, a pay stub is useful for tax purposes, and it can be used to resolve any discrepancies with employee pay.Is it Possible for Paycards to be Overdrafted?Usually, paycards works like debit card, allowing cardholders to withdraw up to the limit of the loaded amount. However, there are paycard that allows overdraft for employees. But it can come with hefty overdraft fees if employees use funds over the limit in their account. Usually, you should be able to prevent misuse by subscribing to an overdraft protection service.Will Paycard Affect Credit Score?Paycards, like all prepaid cards, do not affect an employee's credit score.What is a Paycard Gets Lost or Stolen?A replacement card can be issued in such cases. The employee needs to notify the employer, and then the employer should immediately notify the card issuer. The employee is not liable for the incident as long as the issue is timely reported. Paycards come with similar protection as that of a prepaid card.The reporting time is determined by the card issuer. If you wait longer to report after learning of the loss and theft, the fraudulent charges may increase. You may have to pay a fee for the replacement card.Pros and Cons of PaycardsProsA win-win situation for unbanked employees and their employers.Green alternative to paper checks.Immediate payment to employees.No hassle of cashing a paycheck.No monthly or maintenance fees.Added security when assessing their funds (paycards require a PIN).Employees can report to the issuer if funds are used unauthorized.Paycards can be reloaded during each payday, saving money on issuing paper checks.Added efficiency for the employer as the employer would not have to physically present or mail paychecks to unbanked employees.ConsEmployees may incur fees for several reasons. Be aware of such potential fees.Employers have certain responsibilities to educate employees about the usage of paycards.Limited range of services and flexibility in managing your funds compared to bank accounts and other prepaid cards.The best paycards programs are easy to set up, have lower fees, quick access to funds, and provide a range of benefits such as cashback and discounts. We have made a list of popular paycards providers for businesses:Wisely Paycard by ADPOnline portal and mobile appCompatible with Apple Pay, Samsung Pay, and Google PayZero cost sign upNo hidden feesNo credit checkNo overdraft feeZero cost direct deposit of pay and other sources of income (including government benefits)Accepted wherever Visa is acceptedKeep track of spending and account balances 24/7 on the appGet cash back at major retailersSurcharge-free ATM withdrawalsFDIC insuredSecurity features include instant card lock, purchase protection, and travel alert notificationsRapid PaycardDirect Deposit onto rapid paycardLoad funds from approved checks with Ingo Money mobile appsNo fee for cashing paycheck24/7 account access with rapid! Access mobile appNo credit checkCan be used at ATMs, merchants worldwide, wherever Debit Mastercard or Visa debit cards are acceptedPay bills and make purchasesBook airline and hotel reservations onlineEarn interest on savings accountGet cash back rewardsFDIC insuredMoney protected with Zero Fraud LiabilityKittrell PaycardNo fees to use (there are fees for certain situations)Fee-free ATM network with MoneyPassWebsite and Kittreall AppGet real-time alerts and push notificationsCash back at point-of-sale terminals2-way texting to manage your card and accountCompatible with Apple Wallet, Google Pay, Samsung PayEasy portability (Get direct deposit of stimulus checks, tax refund, benefits)Freeze or unfreeze card on-demandSkylight PaycardZero sign up feeNo credit checkNo minimum balance Personalized your card with a family photo or unique imageManage money anywhere on Mobile AppDirect deposit your government benefits, tax refundsUse anywhere where Visa Debit & Debit Mastercard are acceptedFDIC insuredZero liability protectionPay bills onlineEarn interest on savings accountEarn cash back with Payback RewardsSend money to or receive money from friends and family with Netspend cardsSet text alerts about transactionsRefer a friend and boost your card balanceSkylight overdraft limit is $100 & 3 times/ monthConclusionOverall, paycards can be convenient and cost-effective for employees and employees when compared to paychecks or for those employees with no bank account. And the paycard fees are becoming more transparent and competitive.While paycards can be challenging at times, especially when you are employed in multiple jobs and have a separate paycard with each employer, your funds are scattered in multiple cards so it becomes difficult to manage your finances. Some may prefer to put all their money in one place, like a checking account.However, if you can't open a bank account, a paycard is a great option to get paid. Read the fine prints before signing up for a paycard and know the potential fees that come with it.

Download the CompareRemit App
Download the CompareRemit App
Personalize your CompareRemit experience with your preferred corridor and receive target exchange rate notifications, seamless transitions to partner apps, and real-time comparisons of top remittance providers at your fingertips.
Personalize your CompareRemit experience with your preferred corridor and receive target exchange rate notifications, seamless transitions to partner apps, and real-time comparisons of top remittance providers at your fingertips.

Get Listed or Advertise

Download Our Free App

Try our faster, enhanced mobile app for a better experience

CompareRemit App