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A man uses his debit card at an ATM.

This week brought a personal finance victory for former McDonald's employee Natalie Gunshannon. She's one of the more than 4.5 million working men and women who get paid with something known as payroll debit cards instead of paper checks or direct deposit. A few weeks ago Gunshannon filed a class action lawsuit against a Pennsylvania McDonald's franchise which offered her a fee-carrying debit card as her only option for payment. Now that franchise says it will begin offering its employees a choice of free payment options. As more and more money changes hands electronically, these payroll debit cards are gaining traction among companies and are used in the public sector as well. A recent New York Times article explored how people are getting nickled and dmed to death by the hidden fees associated with this method of payment. Research from the National Consumer Law Center in Washington D.C. helped inform that piece. The law center's managing attorney, Lauren Saunders, joins us to discuss consumers' rights.

"Everybody's trying to get rid of paper and paper checks in this new era of everything electronic. Payroll cards, when done right, can be a win-win for both the employer and the employee as a fast and convenient way of getting people their pay," says Saunders.

A well-designed card can be completely free, says Saunders. But it depends on the type of card you receive. Other prepaid cards could have hidden fees.

"There can be fees if your card is denied and you try to use it and there's not enough money on it. There can be a fee if you want to find out your balance at an ATM. There could be a fee if you don't use it for a couple of months. There could be a fee for asking for a check to cash out the card when you're done with it," says Saunders.

Some cards even have overdraft fees. These cards offer people what they call overdraft protection, and if you agree to that and you use the card -- but don't have enough money on it -- you could be hit by a $25 fee. Saunders says it's important to know your rights.

"Federal law prohibits an employer from requiring you to use a payroll card. They cannot require you to have an account at a particular bank or a card at a particular bank as a way of getting your wages. You have to be given a choice," says Saunders. "Federal law also on payroll cards protects you if there are unauthorized charges on the account or if you need to see your transactions, there are some federal protections. For general prepaid cards, they don't have quite the same protections."

And private employers aren't the only ones who use these types of cards. In a number of states, some federal benefits are also administered with these cards -- like disability and medical leave.

If you are not given a choice by your employer about using a payroll debit card, Saunders says you should complain to your employer, complain to the Consumer Financial Protection Bureau, or write to your state's attorney general.

About the author

In more than 20 years in public radio, Barbara Bogaev has served as the longtime guest host of NPR’s flagship program Fresh Air with Terry Gross, as well as host of APM’s news and culture magazine, Weekend America and the weekly national documentary series, Soundprint.

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