Government-Issued Debit Cards Can Cost The Unemployed

More than 40 states issue prepaid debit cards for $53 billion in unemployment benefits and child support. But in many cases, banks are charging fees when the cards are used. (AP)

At least 40 states issue more than $53 billion in unemployment benefits and child support on pre-paid debit cards. These are just like regular debit cards, but they’re preloaded with cash. It’s cheaper for state agencies than issuing checks and seems more convenient for recipients. Except for all the fees. Withdrawing cash or checking balances can cost the user money. They can even be charged a fee for not using the card quickly enough.

The recent financial-overhaul law cracked down on fees that banks can charge credit card users. But prepaid debit cards weren’t included in the bill. And now banks are trying to recoup billions of dollars in lost revenue on credit card fees, by racking up additional charges on prepaid debit cards. Suzanne Martindale of the Consumer Union explains how the fees work.

WSJ: Drawing Benefits Via a Debit Card? There’s a Fee for That

We welcome comments from all of our listeners. Post below. Please stay on topic and be civil. Comments may be moderated by us, but you are solely responsible for the content of your comments.

Olivia Parr Rud

Please address the elephant in the room. Banks are big contributors to political campaigns. They have influence everywhere…
g, Buffalo

They don’t charge fees if you use participating bank or use it to pay for things at the store.

Loveofchevy

They do charge fees to pay for things at the store and there is NO bank associated with the cards. i have been a victim of this scam with my direct insurance agent. i live in orlando florida and the direct visa debit card is set up the same way the unemployment debit card is. first of all insurance agents are falsely signing up ALL new customers at silverstar and hiawassee rd. Its a 8 dollar fee that they put in the insurance package and sign u up for the card. it cost money to put money on the card, it cost money Every time u use your four digit pin, and it also cost money if u fail to use your card within their time limit. Its very sad that our government is involved with this. the fact that unemployed people will Have to Share their small amount of Aid from the state is unacceptable. government is suppose to protect civilians big and small, but these days lobbyist control more than any other group.

PS Frog

I understand the unemployment beneficiaries lose money by paying fees to banks. I guess I don’t understand how the states are losing money? The fees aren’t paid twice? Only one person is paying the fees. On the other hand, the states/federal govt. seem to be saving lots of money on check stock, envelopes, labor to stuff envelopes, postage, etc.?

Additionally, what about the cost of all the lost/stolen checks in the mail?:

“According to the Treasury Department, more than 540,000 Social Security and Supplemental Security Income paper checks were reported lost or stolen in 2010.”

http://www.gtrnews.com/greater-tulsa-reporter/9895/us-treasury-retires-paper-checks-transitions-to-digital

For the state and federal coffers, it sounds like the fees are more than compensated by the savings.

PS Frog

Just looking at Michigan debit fees don’t seem to be a problem….Michigan’s new law for employers and debit cards:

“AN EMPLOYER SHALL NOT PAY WAGES BY ISSUING A PAYROLL DEBIT CARD UNLESS THE PAYROLL DEBIT CARD HAS ALL OF THE FOLLOWING CHARACTERISTICS:”

“A) ALLOWS THE EMPLOYEE TO MAKE AT LEAST 1 WITHDRAWAL OR
TRANSFER [EACH WEEK] WITHOUT CHARGE FOR ANY AMOUNT THE EMPLOYEE…”

“C) PROVIDES A METHOD FOR THE EMPLOYEE TO MAKE AN UNLIMITED
NUMBER OF BALANCE INQUIRIES WITHOUT CHARGE, EITHER ELECTRONICALLY OR BY TELEPHONE.”

http://www.legislature.mi.gov/documents/2009-2010/billengrossed/House/pdf/2010-HEBH-5821.pdf

sounds reasonable.

yesimabanker

Thank you, Buffalo, for your comment. When bank’s issue these cards (which are used for many purposes, these aren’t specific for unemployement payments) they also provide a disclosure to the issuing party to be provided to the card recipient. The disclosures tell the card holder which transactions will be free and which transactions will be assessed a fee. If the cardholder will conscientiously follow the rules outlined in the disclosure they can transact business without being assessed any fees.
Please tell me why most people assume that banks are unlike any other business and should not charge a fee for their services.

Shiny

if they were like any other business, they would not need a TARP bailout nor create a financial disaster that has ruined the wealth of millions of Americans. The Man who wore the Star….Greenspan and his Fed were a union for bankers and hedge funds……Atlas Shrugged and his credit default swaps was the union orgainzer for bankers……….

Loveofchevy

banks just received our bailout money. they also received a pass on any justice for their recklace neglect and greed. Why the heck is government still giving banks first priority. i understand they can save money by going paperless….but i think there is a way of accomplishing the same outcome without taking more money from unemployed in the form of card fees…Honestly we can do better and we should expect better from our Government