So How's Wal-Mart Ruining America This Week?

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Heavy is the head that wears Wal-Mart's (NYSE: WMT  ) crown.

For years, this megaretailer has been blamed for everything from mooching off the U.S. taxpayer to laying waste the town hardware store. It's been accused of beggaring the union worker and poisoning American babies. While all these charges can be debated, there's one thing I'm certain of: Wal-Mart's latest idea is bad for America.

I'm speaking, of course, of the switch to payroll cards.

Um, OK ...
An innocuous idea, you say? At first glance, maybe. Wal-Mart plans to exit the paper paycheck game over the course of the next few weeks, switching all employees to direct deposit if they have bank accounts, and if they do not, to "payroll cards."

If you've never heard of these gizmos, you'll find a quick primer on the subject here. But basically, a payroll card is a debit card onto which the employer loads the employee's salary. The employee can shop with a payroll card as with any other debit card, make ATM withdrawals, or even draw on the balance with checks.

So far, so good, and it's not even novel. Visa (NYSE: V  ) and MasterCard (NYSE: MA  ) both offer "reloadable" prepaid cards to their customers. Wal-Mart itself has sold precharged cards since at least 2007. Capital One (NYSE: COF  ) , Citigroup (NYSE: C  ) , and JP Morgan (NYSE: JPM  ) were quick to climb aboard. As for payroll per se, Sears Holdings (Nasdaq: SHLD  ) was one of the first entrants into the market when it began a payroll debit card program for employees in 2002.

Consume, consume, consume
And yet, just because an idea is popular doesn't mean it's good (cf health-care reform), and payroll cards are a case study in popular-but-bad ideas.

Payroll cards encourage spending and discourage saving. While paychecks deposited to a bank account begin earning interest for their owner from Day 1, funds loaded onto a payroll card do not. To the contrary, cardholders often pay a monthly fee for holding the cards. And many charge for ATM withdrawals, too.

So, far from being rewarded for saving money, payroll cards encourage workers to spend their cash as fast as possible -- before the monthly fees eat it all up. I suppose a company whose business depends on getting people to spend rather than save sees nothing wrong with that concept, but I don't like the idea. I think it's a retirement killer.

Foolish takeaway
As the nation's largest private employer, Wal-Mart widens a trail that many others are sure to follow. And if they do, Wal-Mart's latest idea will lead us all down a path to penury.

Disagree? Feel free. If you believe Wal-Mart's payroll cards are a good idea, post your thoughts below.

Fool contributor Rich Smith does not own shares of any company named above. Sears Holdings and Wal-Mart are Motley Fool Inside Value recommendations. The Motley Fool has a disclosure policy.

Read/Post Comments (15) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 04, 2009, at 12:31 PM, Proteuslizz wrote:

    I really don't see how a company pays its employees has anything to do with the employees financial skills. But since we are on the foolish topic, it could be better for some. I will compare using the Walmart pre-paid Visa card as the Direct Deposit card to a bank account;

    Checking accounts charge a NSF fee between 15-35 dollars, not to mention the $25 fee you have to pay to the company that you bounced the check at. For one returned check, the consumer pays an additional $40-$60. With a pre-paid Walmart Visa card there are no NSF fees because they will not process the transaction. Not only saving the consumer money but it also keeps them out of a deeper "financial hole".

    Some bank accounts charge a monthly fee based on either time or balance of account. These charges can be up to $25. The Walmart pre-paid Visa card charges $3 a month and it can be waived if you deposit over $750 within the time frame.

    You can also use this card as you would an ATM card and the fees are comparable to a bank ATM card.

    No matter who the company is (Sears, Wendys, Walmart), they can not disprove the old addage of "A fool and his money are quickly parted".

  • Report this Comment On September 04, 2009, at 12:49 PM, mrwizard555 wrote:

    i was offered one of these at work, and ran screaming from the room. talk about a rip off.

    my direct deposit gets me no annual fee checking AND free online bill pay AND a debit card with no fees if i use a very large set of ATM's or any POS terminal for purchases.

    while i get no interest for the checking balance, i am not letting somebody i have no relationship with, use my unspent balance for free. if i use the card with a PIN, i can't overdraw.

    BTW, i also live within my means

  • Report this Comment On September 04, 2009, at 2:46 PM, pmfjdavis wrote:

    Why look at the negative. You could just as easily say that Wal-Mart is encouraging it's employees to open a savings/checking account and use the direct deposit option. All smart employees will choose this option in the long run in order to save the fees you discussed. When they open the savings/checking account it encourages saving money as you discussed.

  • Report this Comment On September 04, 2009, at 3:23 PM, TMFMmbop wrote:

    You lack evidence to support this claim: "Payroll cards encourage spending and discourage saving." Not saying it's not true, but I doubt people who cash paper checks without having bank acocunts have extremely high savings rates anyway, so this is a bit of a specious argument.

    Further, you could have credited the company for saving paper and cutting costs. Finally, you ignore the fact that employees can withdraw cash from WMT registers (the place they presumably work at and visit frequently) without paying a fee. (You say in your quick primer that employers should just pay in cash, which would make the WMT parking lot on payday rich hunting grounds for muggers. Good times.)

  • Report this Comment On September 04, 2009, at 4:07 PM, jtrivitt wrote:

    I haven't actually received a paycheck since the late 80s and it hasn't been an option at my employers. One employer would open an account at their credit union to deposit my paycheck into if I did not give them bank account information. So Wal-mart has found another, cheaper way to pay employees who choose not to provide a bank account for direct deposit. I just don't think this is a big deal.

  • Report this Comment On September 04, 2009, at 5:43 PM, jmar7 wrote:

    Seems this option is for those who currently do not have a bank account to utilize direct deposit. So, if they do not have an account, how can they be saving anyway? My experience seems to indicate you burn through cash quicker then using a debit card. I think twice about a purchase if I have to swipe a card, vs. using cash. My cash tends to go quickly, leaving me later scratching my head wondering where. More importantly, this concept really takes the hassle out trying to find someone to cash a payroll check. Those who do cash them, tend to want to charge for the convience.

  • Report this Comment On September 05, 2009, at 5:26 PM, cvmatheo wrote:

    It has been said that eventually all money people have will be on a card.Your personal info with all your net worth and big brother will have this info.Now if you tick of big brother by ,lets say,protesting,your card,your existance,could be by by.Non existant.So Wal-mart will control your money.If your #is stolen what is your recourse?Socialism,Marxism.It is happening.

  • Report this Comment On September 06, 2009, at 1:52 AM, madmilker wrote:


    "Under the Federal Reserve Bank Act, the bankers control our economy. The FED controls interest rates and the amount of money in the economy. These factors determine either economic prosperity or the lack thereof. Bankers are now pushing for a one world government and a cashless society. Why cashless? No cash means no money for drugs, no theft, and the ability to collect taxes on the underground economy. Anyone who wouldn't support a cashless society must be a drug dealer, thief, or tax evader, right? What a cashless society really means is the banks can now control you. Today you fear the IRS. In a cashless society, if you disagree with the bankers' political goals, you'll find your money gone via computer error."

  • Report this Comment On September 12, 2009, at 4:01 PM, trav1085 wrote:


    If I worked at Wal-Mart, I would blow my card on Zellers. Or anything non Wal-mart and see how they enjoy their plan backfiring on them.

    Employee boycott, anybody?

  • Report this Comment On September 14, 2009, at 12:38 PM, javasully wrote:

    If you're looking for a debit or payroll card that really can be used for free, you should check out the Money Manager card. Do a google search for "Money Manager Card" - not Money NETWORK Card. I work at Starbucks and they offer us that card. I have it and it is much better than anything else I found. I don't think I have paid a fee to use it yet! I use to have the Rush Card, but it cost way too much to use and I never knew when I would be charged a fee.


  • Report this Comment On September 30, 2009, at 11:10 PM, volvoV70guy wrote:

    I work for Walmart, and I have a Money Network card. At first I was worried about it, because I heard a lot of conflicting information about fees associated with it and such.

    I have the documentation it came with in front of me right now. Apparently, there is no maintenance fee, no purchase fees (both signature and PIN purchases are free), free to withdraw at registers at Walmart or Sam's Club, free to use Money Network checks and to order them, free transfers, free loading of other funds to the card, etc. The only fees, according to the paperwork it came with, are for ATM transactions ($2, but one free per pay period), lost card replacement ($10), and paper statements ($0.50). The daily limits are quite high as well.

    I'm actually kind of happy about it now that I know all that. I'm planning on replacing my checking account with it. I had been planning on leaving my bank anyway. It will be nice not having to go to work just to get my check, as I don't work Thursdays.

  • Report this Comment On October 24, 2009, at 3:24 PM, javasully wrote:


    Good point on the ATM transactions. But, my card allows free ATM transactions on their network ( and they are everywhere.

    And, your point on lost card replacement. I did lose my card twice. The first time, I could wait to get it via the regular post office, and it was free (and it always is this way). The 2nd time I wanted it faster and they had it delivered by Fedex. This time, it cost me $10. I read somewhere that Walmart's card cost $10 for delivery from the post office and somewhere near $35 for quicker delivery.

    BTW, I got rid of my checking account as well!


  • Report this Comment On October 24, 2009, at 3:25 PM, javasully wrote:

    I apologize... I should have said that I have paid 1 fee since getting the card: the $10 Fedex fee.


  • Report this Comment On July 01, 2011, at 6:50 PM, Pagn93 wrote:

    I'm going to necro this discussion...I am a Walmart employee and use the paycard option. I believe the author of this post should have done a little more research before jumping on the Evil Wally-World bandwagon.

    As Volvo stated above, there are no maintenance or purchase fees; no fees for loading, unloading, or transfers. All employees may use the one free atm withdrawal per pay period for up to $600; in addition (continuing on what TMFM stated), at any time an employee may use the POS withdrawal option for up to $3000 per day; and straight cash withdrawals or ACH transfers up to $10,000 per day.

    In fact, the only fees that apply to the Paycard are the very ones Volvo mentioned...that's it, even NSF and returned check fees are waived for employees.

    As far as saving goes, a lot of employees use their matched IRA (FT only) and stock purchase options rather than save cash in a conventional bank. I, personally, enjoy playing with my investments and pulling 15%-20% in interest annually rather than the paltry 1%-4% or so the majority of banks offer; even hands-off I can average around 10% in the money market...not to mention the list of fees most banks want to charge for the slightest action on your account.

    When I load my card the money is available immediately, not the next business cycle; deposits and withdrawals are available whenever your store is open (usually 24 hours); I can transfer my money to any account or other card free of charge (my last bank only gave you 10 free e-transactions then charged $5 each additional); and I have the option to pay with either my debit card or through direct payment with my routing and account number just like a brick-and-mortar bank.

    All-in-all, while I may not agree with everything home office does, I am very satisfied with the Paycard program.

  • Report this Comment On May 02, 2012, at 6:02 AM, irrelevantslave wrote:

    you are controlling all communities you enter,shutting down smaller business. You are using the economy forcing us to shop with you. buying cheap quality. you are just another big business taking advantage of us all. I say, as you load your pockets, f___ you. you too, are corrupt, greedy pricks and i will never shop with you. plus, your store has crappy qaulity and the food you sell is the bottom of the line. I wouldnt feed my dog your human food. Youre making bucketloads of money though, arent ya, ya greedy bastards. Karma will make you pay. down with big business.

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