Prepaid cards that take a bite out of your paycheck

Is it possible to earn less than minimum wage at a Fortune 500 company? It is if your paycheck is loaded onto a prepaid card that levies hefty fees each time you try to gain access to your money.

The McDonald's franchise in Pennsylvania that Natalie Gunshanno worked at required its employees to receive their pay via a Chase prepaid card that charged $1.50 for ATM withdrawals, $1 for balance inquiries, and $.75 for each online bill payment. So, she launched a class-action lawsuit in June to get restitution for those fees for some 750 employees and has since put together a petition asking McDonald's leadership to end the practice at McDonald's nationwide. The petition has received more than 290,000 signatures.

Continue Reading Below

The franchise she fought back against caved to pressure and now offers other payment options to its employees. But the former employee says in her petition that some franchisees continue to require that workers receive their wages on prepaid cards.

This dustup over prepaid cards has caused the second spate of unflattering headlines this week for the Golden Arches. Earlier, McDonald's suggested budget (designed by Visa) to help its workers get by on their low wages, was widely lampooned for assuming that workers have a second job, pay only $20 a month for health care, and don't need some very minor staples like groceries, clothing, gasoline, and heat. See a line-by-line breakdown of the budget by our sister site The Consumerist.

For more on prepaid cards, and how to design a budget—one that includes heat and real-world healthcare costs—see our articles on creating a retirement budget and family budgeting advice, and our 2012 article on consumer prepaid cards.

Also see the May press release by Consumers Union, the policy and advocacy arm of Consumer Reports, urging city governments to stop issuing prepaid cards that come with high fees and weak consumer protections.

Copyright © 2005-2013 Consumers Union of U.S., Inc. No reproduction, in whole or in part, without written permission. Consumer Reports has no relationship with any advertisers on this site.