Amway, the massive direct selling and multi-level marketing company, announced Tuesday it will partner with Citi Prepaid to offer its salesforce — Independent Business Owners or IBOs, in Amway parlance — their bonus payments by prepaid debit card, rather than making them wait for paper checks to clear. This is but another step in the ongoing prepaid-ization of small payments.

Already, certain states have teamed up with prepaid card providers to offer unemployment benefits on prepaid cards. Bank of America® administers South Carolina’s program; Kansas and Maryland have teamed up with Citi to dispense their unemployment benefits. All three states were seeking to reduce the costs of their disbursements programs by eliminating paper checks. Citi and Bank of America®, of course, did not forget to levy their fees on the cards, stirring up a bit of controversy in the process — should a bank be able to charge you convenience fees when your state forced you to take your unemployment benefits on a prepaid card? Why does it seem that governments and banks collude to take a taste of all of my money?

Pyramidal, but not a scheme…exactly

And with Amway’s adoption of Citi’s prepaid platform, the same questions arise. Amway, like many state governments actually, has a less-than-positive public perception to deal with, making these questions more pressing. Amway, like Avon and CutCo, is a direct-selling business, where IBOs are given the tools and inventory to sell various consumer goods, like soaps, detergents, cosmetics, and vitamins. Also, IBOs get bonuses for recruiting new members, as well as a cut of “downstream” members’ profits from their sales. This business model has put Amway on the wrong side of pyramid scheme accusations in more than one instance, though no court has ever agreed.

For a good analysis of why Amway (and direct-selling businesses in general) is similar to a pyramid scheme without actually being a pyramid scheme, read this USA Today story on the topic. In essence, there are very few people who have really succeeded in Amway, and they primarily sell very expensive advice downstream, rather than selling actual products. Newer IBOs who sell products make as small as 1% commission on their products — a large chunk of their profits going upstream — and they are stuck with items that are marked way above their market value, making them difficult to even sell.

According to the story, Amway IBOs make just $115 a month on average. Only 0.26% of sellers earn more than $40,000 annually, according to USA Today. It’s not a pyramid scheme, because there is a product for sale, and it’s all above-board otherwise, but income distributes itself in distinctly pyramidal fashion.

Should your employer choose your bank?

Now, the small sums that most IBOs earn will be deposited directly on to an Amway Visa Prepaid Card, at least the new enrollees. Anyone joining since December 2011 will be automatically enrolled in the program, which they can opt out of if they like, according to an Amway spokesperson. Existing IBOs can opt in to the card system if they like, and opt out afterward at no cost, she added.

While partially optional, it’s perhaps an appropriate way for a company like Amway to distribute funds, when they don’t offer compensation checks large enough to necessarily push their workers into direct deposit, like most full-time employers tend to. An average Amway employee might very well be un- or underbanked, making a prepaid card an attractive and cost-effective way to do payroll.

Amway is not the first company to switch their payroll services to prepaid cards. Citi’s website boasts of their deals with Men’s Wearhouse and Stein Mart, both of which are retail companies that likely have many part-time employees, making paper paycheck distribution somewhat difficult.

Just how fair it is for employers to push their employees into effectively becoming customers of certain client banks in order to save money?

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  • Andrew

    Wow, as a success in the Amway business, without any information systems giving me any money at all, you have no idea what you are talking about. I encourage if you want to write an educated article, get educated.

  • Scooter

    Obviously this writer has not a single clue what he is talking about in regards to the Amway Corporation. Why would you even publish this when the author has a negative attitude throughout the article?

  • workhardplayhard

    I agree with Scooter. The title says prepaid cards for payroll purposes, not share your uneducated opinion on Amway.. I would like to point out that Amway offers multiple payment options, not limited to the prepaid card, I enrolled in auto-pay with my bank account because that was my preference.. also there is currently no bracket in which there is a 1% bonus payout i don’t know if the author just guessed or has a poor source, but the lowest bonus pay percentage is currently 3% which has been in effect for many years, and also that will actually change to 9% with the new bonus structure next year (which for a new IBO ongoing to platinum is now 70% more in total bonuses than it was before) Also we do NOT, again do NOT get paid for “recruiting members” as stated in the article. In fact, as an example, even if i found a million people who wanted to become my downline and an independent business owner with Amway, i still would not get paid a penny. its not based on how many people you can find to sign up, its based on a sliding scale combined of you and your network’s total sales.. It isn’t based on signing people up, its a retail and affiliate marketing business, like amazon, only yes you do get a percentage of the total business volume (bv) you and your network generate, which that percentage is determined by you and your downlines total point value (pv), however for each individual “leg” or downline, you would subtract whatever their percentage is, and as such you are not taking any away from your downlines. With that said you can conclude that it is not a pyramid scheme. Did Ray Crock get paid billions for franchising McDonalds? yeah but he didn’t accomplish that sitting on the couch, so in a MLM business you get rewarded for re-franchising over and over as much as you wish (which takes a lot of hard work and dedication), yes, i think that’s fair. Its not easy, but anyone with the right attitude, who is willing to put in the time and effort can build a successful Amway business. Oh and one more thing, you know-it-all author, The Federal Trade Commission (FTC) has fully inspected the “ins and outs” of global giant Amway and it’s business practices. They concluded it was in fact a perfectly legal business and cleared it to continue. We don’t qualify for any of the bonuses if we don’t sell a minimum of 50pv aka approx $135 in retail to customers, therefore no one could make money in this business off of just the network marketing alone, if they don’t sell. + Amway offers 180 money back guarantee on everything including the very small cost to join and get a business license as well as a binder full of current information on the products and bonus structures. I mean what more can they do to go above and beyond in proving to all the misinformed doubters that they are a legal and successful business with higher than high integrity and a time tested method of helping people create successful business’s of their own? Amway is legit. It always has been. $11.5 Billion in Sales 2013 and $11.3 in 2012 (Facebook did $3.7 Billion in 2013 and $1.26 Billion in 2012)I did my homework, i did it very well before starting. I am real, I’m 26 years old and live in Sioux Falls, South Dakota, i started in May this year (2014), its now august 2014 and no I’m not rich yet, and yes i have made paychecks already, and have seen other’s very big paychecks. (i wont say numbers but just wow!! incredibly motivating to say the least) But as i continue to tell more friends about the products i sell i continue to get more customers. And the more i take the time to help those who told me they would also like to do this, help them also sell and build, the more and more money i will make. Its NOT get rich quick, so if that’s what your looking for keep looking. But IBO’s in Amway who keep going and going and keep improving tend to eventually make a very very comfortable living.


    Lets take opinions out of it shall we? Here are some FACTS ABOUT AMWAY!!! ::

    – Tens of millions of customers in over a 100 countries & territories worldwide,
    – A+ Better Business Bureau rating,
    – Approved by United States Federal Trade Commission in 1979 and continue to meet or exceed all legal requirements,
    – 11.5 Billion (yes i said BILLION) in annual sales 2013,
    – Over $400 Million donated to various causes & charities and have accounted for $190 Million used in the "AMWAY ONE BY ONE®" Campaign towards improving over 10 Million children's lives around the globe by providing necessities such as; food, clean water, education & medical care,
    – Offers 180 money back guarantee on all IBO memberships and on all products (in USA, other countries may vary),
    – Debt free company,
    – Privately owned and held (no shareholders to stop the generous bonus payouts to IBO's),
    – Over 70% of the total profits are paid out in bonuses to IBO's,
    – Recognized by Forbes as one of America's largest private companies,
    – Its Legitimacy & profitability is recognized and endorsed by; American Chamber of Commerce, Forbes Magazine, Time Magazine, Fortune Magazine, Dr Phil from TV, Dr John Maxwell a leading author in Business, Donald Trump a well known entrepreneur, and many many many more,
    – In business since 1959.

    My opinion, the author of this posting couldn't hope to ever create something so grand, and who's comments couldn't be more misleading about Amway's details or integrity!!

    To anyone considering Amway, keep an open mind, do your homework, and weed out the negative people's opinions. Just find trustworthy sources and PAY ATTENTION TO THE FACTS!!!