What is a Direct Deposit Card?

A direct deposit card is a form of pre-paid debit card that does not require the possession of a traditional bank account. Direct deposit cards are sometimes offered as an alternative to payroll or federal fund checks, such as social security payments. It is important to read the fine print before signing up for a direct deposit card, as there can sometimes be surprising fees for certain types of transactions.

For some people, a traditional bank account may not be an option. Those with a poor credit history or low funds may be unable to open a traditional checking account and use a bank-issued debit card. Such people may be charged fees every time they need to cash a check, or may be stuck without needed funds while waiting for a check to clear. A direct deposit card can help eliminate some of the inconveniences of not having a traditional bank account.

Most direct deposit accounts work in a relatively similar way to one another. On a specified date, say the first of each month, an employer or funds distributor electronically transfers the correct funds to the direct deposit card. The account holder is usually able to access funds that same day, without the hassle of cashing a check or dealing with payroll tardiness. Most cards can then be used just like a debit card: users can withdraw cash from an ATM or use the card as payment for a transaction. Some accounts even include services such as automatic bill pay, which automatically deducts regular bills from the direct deposit account.

The major drawback to a direct deposit card is the possibility of transaction fees. These may vary from company to company, but can help to chip away at funds. Fees may be charged for ATM withdrawals, overdrafts, bill pay services, replacement cards, or the transfer of funds to a bank account. Many also charge a fee for any transaction that requires a currency conversion, such as using an ATM in another country.

Employers sometimes give workers the option of getting a direct deposit card to manage monthly wages. This can help assist workers who do not qualify or do not want regular bank accounts. Additionally, using direct deposit systems cuts down on paper supplies needed to issue checks, and helps to ensure a speedy and accurate payroll process by using an automated system. This type of payment process is also popular with some government-managed funding systems, such as Social Security and disability payments.