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The U.S. government, in a bid to save money and provide better service to the estimated 4 million Americans receiving Social Security benefits that don't have a bank account, is planning on issuing them a prepaid debit card, in place of the current practice of sending out paper checks.
This new debit card is touted to be identical in function to existing bank debit cards; usable at almost all ATMs and stores, requires a PIN number to use for security, and is connected to an account that the government can automatically deposit Social Security and SSI benefits into.
IT'S A BANK ACCOUNT!
The government is going to set up 'accounts' for all those that don't already have bank accounts in this country, tied to a debit card. They then plan to deposit the monthly SSI benefits into these 'accounts' to make them available for use.
If it walks like a duck, and quacks like a duck, and floats like a duck, obviously it's a witch, but that's just me.
The Good
This will allow users to not have to worry about SSI checks being stolen, or having to have a separate bank account to deposit said checks. It will be a savings for the government too, as the cost per transaction for the debit cards is around $.04 vs. around $.40 for check-based government systems.
It will prevent check forgery and promote a better security via a PIN based system.
And, of Course, the Bad
Where to start? Fees, fees, and more fees.
"Cardholders will get one free ATM cash withdrawal per deposit per month, but Comerica will charge 90 cents for each additional withdrawal. Like other debit-card holders, users may also face surcharges at many ATMs. Other fees include $3 for international ATM withdrawals, 3% on international currency exchanges, 50 cents for each online bill payment and 75 cents per month for paper statements."
There will be fees to withdraw cash, fees to merchants to process these payments, not to mention having to have the machinery available to process them. And the recipients don't even get interest on their money sitting in the government's 'account'. The interest/float belongs to the government.
My take? Just bite the bullet, join the 20th century, and go get a bank account. It's no worse than the system the government is going to be putting in place, and you get a few benefits (like accruing interest, and free ATM usage at your bank's outlets, free bill pay, etc.).
What do you think of the proposed Social Security Debit Card?? Leave us a comment.
Sources - Wall Street Journal - Treasury Plans Social Security Debit Card - WSJ.com
- Dallas News - Comerica to Offer Social Security Debit Cards
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January 30th, 2008 at 11:05 am
I'd much rather be able to set up direct deposit into my own bank account. I find it crazy to believe that these people wouldn't have bank accounts...but maybe they don't trust banks because of the Great Depression (we're talking Social Security age after all). Or maybe they have no money.
January 30th, 2008 at 12:49 pm
In the UK they got round this problem by requiring banks to offer "basic accounts" with no fees and limited facilities (no overdrafts, no interest etc). You can even open one with the Post Office.
January 30th, 2008 at 11:42 pm
It's a decent idea in terms of the smaller fees for processing, however I can see many people receiving these S.S. payments becoming annoyed with having a separate account for these payments, rather than just depositing paper checks into their already-existing accounts.
January 31st, 2008 at 6:58 am
One thing I didn't mention in the article is there is a HUGE 'training' program (read: propaganda) going along with the changeover to convince those that would be using the card that it's a good idea as opposed to the 'old' paper checks.
I'm wondering how many actually end up biting and taking the bait.
January 31st, 2008 at 8:27 pm
As Paycards go, this one is pretty good. To see the other end of the spectrum, check out the Wal-Mart card or the Rush Card... Talk about fees.
You had mentioned that the government was earning interest on the money sitting in the government account. I think we have to remember that these people don't have bank accounts anyway. They sure as heck weren't receiving interest on their money when they paid a percentage to the check cashing places to cash the check, then kept the money under their mattress.
Over 28 Million Americans do not have bank accounts for one reason or another. Be it past performance with a bank, inability to keep a minimum balance to avoid fees, distrust, etc. The fact is that they just don't have them.
I have nothing to do with Comerica (the card issuer), but I truly believe that having their funds on a Visa (or is it MasterCard) Debit Card is substantially more secure for these individuals.
Should they be allowed multiple ATM withdrawals? Of course.
I do have another problem, though, with the ATM fees. What it fails to mention is that after the first free ATM withdrawal, Comerica will charge $0.90/each ATM withdrawal. BUT, what about the ATM owner's fees? What happens if they go to a Bank of America ATM? I suppose that they will be charged $0.90/each from Comerica PLUS the $2.50/each that Bank of America charges for non-network ATM customers.
In the end, the debit card is a good idea for those without bank accounts. Think about it... I have no idea what the average SSI check amount is, but let's consider $500/month average. If that recipient chooses a check cashing facility to turn that piece of paper (the check) into cold hard cash, they would be charged $10-$15. At a $10 check cashing charge, that is 12 ATM withdrawals (1 free and 11 @ $0.90/each if $0.90/each is the true total charge for ATM withdrawals in excess of the 1 free).
The net cash affect here would be zero. But, the security of not having $500 or so in cash laying around their home or in their wallets/purses is priceless.
Having rambled on long enough... there's my additional positive and negative remarks to the program.
Oh, and Dara... those individuals who already have banking accounts have always had the ability to get direct deposit into their bank accounts. These people will not be receiving the cards.
I'd love to hear additional thought on this. If you choose, feel free to contact me directly at poker123@comcast.net.
February 1st, 2008 at 9:04 am
WOW!! Quite the comment there. As for fees, you're right, I didn't put it in the article, but they have to pay the standard out-of-network ATM fees. ($2.50-3.00) each time. That could eat up a lot in the long run.
All your points are right on. I agree with them. My only addition is this seems to be a 'decent' solution, but still not a 'best' solution. Maybe they should put more money into convincing people to get REAL bank accounts and talk to the banks preventing some people from getting accounts (because of past histories) to be more lenient in cases of SSI benefits recipients.
February 1st, 2008 at 9:24 am
Truth be told, I don't think the banks are in business to house small accounts. Rather, they are in the business to charge fees! I think it is a snowball's chance that they will cater to these type of folks and be more lenient. They are all about the fees... low balance fees, overdraft fees ($30 ?), etc.
Having said that, I personally bank at Bank of America, but I have a hard time seeing those less fortunate getting the shaft by any business. Those with the least amount of money have the most to lose by spending extra fees.
There was an article in the WSJ on Thursday, January 24th by Bill Clinton and The Governator on the very subject of the unbanked getting the shaft and what should be done. Same conclusion as you in that the banks should be more lenient. Not going to happen unless they are forced to do so.
As for ATM fees, do the recipients of the SSI cards even have "in network" ATMs? Or, are they simply not charged by Comerica on the first transaction, but have to fork over the $2.50-$3.00 "off network" fees EVERY time?
Last question as it relates to these cards? Using my example of spending 2% to cash a $500 SSI check ($10), it seems like it would make more sense to go that route rather than choosing the Debit Card (the $10 one time check cashing fee would be the equivalent of 3 ATM withdrawals). If I were to have the option, I think I would choose the check cashing facility with a paper check.
Do the SSI recipients have the option to decline the card and keep receiving checks or are they forced to implement the card?
April 19th, 2008 at 7:18 am
Who can help me? THX.
I live in China, and I can't go to US physically. I just want to open a checking account in BOA(bank of ameriva), what shall I do to reach the target? OR is there anyone who can help me? If you can help me, please contact my email. tangxx8511@yahoo.com.cn
May 7th, 2008 at 4:44 pm
Interesting comments by those who do not receive Social Security checks.
Some of us, I am one, rely on the mailed checks. I have to worry about delays, sometimes up to 4 days and lost or stolen checks.
I have applied for the debit card route. I can make purchases with it onlne or at stores, like any debit card and withdraw cash when I need it.
I will of course have to be a bit more fastidious concerning ATM charges.
I applied for it the first day, April 23rd and my application approval is still pending as of today, May 7th.