Nickel-and-Diming America's Most Needy?


Source: iboy daniel, via Wikimedia Commons.

Imagine this scenario. You're a single mom, working 35 hours per week at your local McDonald's for $7.44 per hour. You've gone to school to work in different fields, but the economy is tough where you live, and this is the best option you could find.

Your take-home pay is $260 per week. But when it comes time to get paid, instead of a check, cash, or direct deposit, you are told the only way to collect your money is through a JPMorgan Chase prepaid debit card. Along with the card comes a litany of fees: $1.50 for ATM withdrawals, $5 to receive cash over the counter, $1 to check your balance, even $0.75 for online bill pay.

Though these fees might sound tiny to some, they mean a lot to you and your child. When you ask your boss to be paid via other methods, you are turned away, even though the managers at your McDonald's --who are paid significantly more -- have other payment options with far fewer fees.

The owners of the McDonald's franchise get to save lots of money with this option, and JPMorgan Chase gets to collect all of these fees, but you -- the single mother trying to put together a living -- you are the one who puts in the hours and still gets the short end of this deal.

Does this seem fair?

Truth is stranger than fiction
This is -- more or less -- exactly what Natalie Gunshannon says she experienced when she worked for a McDonald's franchise in Luzerne Country, Pa., earlier this year.

It's important to note that it was not the corporate McDonald's entity that was allegedly denying Gunshannon the option to get paid via checks, but rather the franchise owners, Albert and Carol Mueller, who own a total of 16 franchises in Pennsylvania.

When Gunshannon was met with this news, she decided to file a lawsuit against the couple. The suit stated that the Muellers were violating the Pennsylvania Wage Payment and Collection Act, as the fees pushed her effective pay below the minimum wage.

A growing trend
This is not an isolated case. The use of prepaid debit cards to pay employees has become more and more commonplace over the past few years. In fact, the FDIC estimates that in 2014, over $60 billion in wages will be dispersed via prepaid debit cards.

FedEx , Wal-Mart , and Home Depot are just a few of the major U.S. employers that have started instituting the use of prepaid debit cards.

There is, however, a key difference between what these companies practice and what Gunshannon alleges the Muellers offered at their McDonald's locations: Employees have an option as to how they want to get paid.

That's an important difference. Believe it or not, sometimes, prepaid debit cards can actually be beneficial to employees. Usually, businesses can negotiate with banks to lower the fees associated with these cards -- which lowers the overall cost of using them. And other times, Americans who don't have bank accounts -- which includes roughly 10 million American families -- aren't paying exorbitant fees to have their checks cashed.

Whatever the choice employees make, it's clear that the actual choice is what matters the most.

A McHappy ending?
Last week, the Muellers announced that they would be offering employees the option to receive their payments via direct deposit, paper check, or payroll card. While Gunshannon's legal team is no doubt pleased with the move, they have stated that they will continue to move forward with the lawsuit.

In addition, New York State Attorney General Eric Schneiderman announced that letters have been sent to more than 20 large companies in the state to ensure that employees are given the ability to opt out of payment via debit cards. Only time will tell how this latest inquiry will unfold.

Making your money last in tough times
When times are tough, as they are for folks like Gunshannon, every dollar counts. Social Security plays a key role in your financial security, especially if you are close to retirement. In our brand-new free report "Make Social Security Work Harder for You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

The article Nickel-and-Diming America's Most Needy? originally appeared on

Fool contributor Brian Stoffel has no position in any stocks mentioned. The Motley Fool recommends FedEx, Home Depot, and McDonald's. The Motley Fool owns shares of JPMorgan Chase and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published