s consumers rely more on using debit cards to pay for purchases, plastic cards of a different sort are increasingly replacing paper checks on payday. The Visa- and MasterCard-branded cards are finding favor with payroll departments and employees alike, offering benefits, some less obvious, for both.

Over the past several years, U.S. corporations and financial institutions have pushed the concept of direct deposit. Estimates indicate there are 150 million wage earners in America; while more than 55% of those are paid by direct deposit, there is a large number of "unbanked" people who have to rely on expensive, often inconvenient check-cashing outlets to cash their paychecks for them.

Payroll cards are reloadable stored-value cards issued through a company's human resources or accounting department. The employees' wages are loaded onto the card, which look and work just like a debit or credit card; funds are immediately accessible through ATMs or at any POS terminal, increasing options and buying power for them. The cards also provide a more secure alternative to carrying cash because they're replaceable if lost or stolen.

Heartland Payment Systems provides both merchant acquiring and traditional payroll services and is one company now offering a payroll card product; the Heartland PayDay Visa card carries the Visa logo and is marketed to small- to medium-size businesses. Mark Strippy, President of Heartland Payroll Co., a division of Heartland Payment Systems, said the cards do indeed offer cost savings, flexibility and convenience for both employers and employees.

"One really unique target area that we're focusing on is the 'overbanked' market," he said. "Payroll cards are accepted well by this segment - these are people whose credit cards are maxed out and, in essence, we're giving them another card without a revolving line of credit."

For employers, the cards present several ways to cut costs. While the actual paper checks are eliminated, employees still receive the federally mandated stubs detailing hourly pay and withholdings for their records. No check to cut, though, means considerable savings for employers, who no longer have to print checks on expensive paper laden with security features.

"The cards provide an opportunity to electronically deliver data and reduce employers' costs today," Strippy said. "Checks are negotiable instruments and have to be printed on very expensive stock. The stubs are not negotiable and can be printed on inexpensive paper."

Beyond saving money on paper, printing and mailing expenses, Strippy said payroll cards have several additional advantages over checks: "We have existing payroll clients using them in a variety of ways - as budgeting tools or as Christmas Club accounts."

The cards also can reduce employee attrition as workers begin to perceive them as a benefit associated with a particular employer; while the cards are reloadable, they are not transferable from employer to employer, he said.

For financial institutions, the cards may be the key to tapping into a market of millions of workers who have avoided banks up to now. For the banks and other providers offering payroll card programs, the cards themselves generate new revenue through fees.

But some consumer advocates say some of these fees for transactions or monthly charges are often hidden and borne by the employee; proponents say the cards are still less expensive than using check-cashing facilities. Income-reporting issues, such as for court-ordered child support payments, also are among concerns expressed by payroll card opponents.

Strippy said Heartland's program has no fee for the employer; employees are charged a monthly fee of $6.95 as well as transaction fees for ATM withdrawals or PIN-based debit purchases. But, he said, "Our goal is to ensure this is more affordable than going to a check-cashing store." When employees sign up for Heartland's payroll card, they are required to provide Social Security numbers, Strippy said, adding, "Our product won't allow income-hiding."