Growing up in The South Bronx, I learned early on that no matter how close some things are, they may remain out of reach.
The Grand Concourse is a mere 30 minutes north of Wall Street, but it is light years away for those who ride the subway downtown to work low- and moderate-wage jobs five and sometimes six or seven days a week. While much has changed for the better in The Bronx, millions of hard-working low income families in New York and around the United States still live without a bank account and other basic financial tools that are essential for upward mobility. They see the American Dream; but it remains just beyond their grasp.
The President recently addressed the crisis of economic inequality in America. And he’s right. The problem has gotten worse, not better—and it couldn’t come at a tougher time. The FDIC recently reported that 48.7 percent of the Latino households and 55.3 percent of African-American households in the U.S. have little or no access to mainstream financial services.
Imagine your life without a bank account and a debit card. Could you access your paycheck without paying a check casher a huge fee or getting pitched for a payday loan? Could you avoid the danger of carrying large amounts of cash to cover everyday expenditures? Could you place a phone order, reserve a plane ticket or pay bills online? Could you get your money back if a product was defective or a business ripped you off?
No. Life in the cash economy drains low-income people of the two things they can spare least: time and money.
The good news is that there is a solution in prepaid payroll cards. When done right, payroll cards can be a benefit of employment, not a burden. Employers can provide these benefits at little or no cost because payroll card technology is less expensive than issuing checks. A good prepaid payroll card is an affordable vehicle for financial inclusion.
Here is how it works. Payroll cards allow low-income families who cannot afford banks—or choose to avoid them—to enjoy many of the same benefits electronic payments offer those with bank issued credit and debit cards. It saves them time and money—and they are made whole if their card is lost, stolen or used fraudulently. It’s simple, it’s easy and it works.
But how do we make sure payroll cards work for working people? This past year, I joined the advisory board of Master Your Card: Oportunidad, a group of Latino leaders across the country who work with MasterCard to help small businesses and consumers learn how to use electronic payment technologies. Following the negative reports about payroll cards, MasterCard engaged us and some labor leaders, including SEIU’s 1199, in a conversation about what steps they should take to ensure their products benefitted employees and employers alike. My main concern was that some employees were actually forced to use these cards. Without education, it is difficult to know or realize the benefits.
The result of our talks is MasterCard’s recently announced six standards for better payroll cards, a major breakthrough for financially underserved workers. The standards include:
• payroll cards be voluntary and provide more fee-free benefits and protections
• employees get one free transfer per payroll
• employees get free access to balance information online or via mobile
• zero-liability protection for lost or stolen cards
• employers are required to disclose all card-related fees in simple, easy-to-understand language—and provide employees with education on how to use the cards to save time and money.
As a result of these standards, payroll cards are safe for working-class families. MasterCard’s high standards for payroll cards are something employees can demand and employers will need to deliver. This financial services company, based here in New York, understands that everyone wins when everyone has access to upward mobility.
Fernando Ferrer is the acting chairman of the MTA and was the Borough President of The Bronx from 1987 to 2001, and the Democratic Party nominee for Mayor in 2005. Mr. Ferrer sits on the advisory board of Master Your Card: Oportunidad, the Latino coalition of Master Your Card, a public education program that works to broaden financial access for financially underserved consumers across the U.S.