The government will offer debit cards instead of paper checks to all Social Security recipients who agree to this new payment method. This will drastically reduce the risk of theft.
Treasury officials are confident that the new "Direct Express" will ease the life of the Social Security recipients by making grocery esier and avoiding rip-offs.
It's aimed at the 3.9 million people who get the benefits but don't have bank accounts, costing more than $44 million annually in paper checks, according to the U.S. Treasury Department.
Last year, $56 million in checks were stolen or lost, the department said.
"We ultimately would like to see an all-electronic Treasury -- with all the security, efficiency and cost savings that would entail," said Judy Tillman, commissioner of the department's Financial Management Services. "This card takes us closer to that goal by combining the best in payment innovation with sound public policy."
The card will act like a bank account and ATM card. Funds are deposited onto it monthly. Each card will have a PIN number. It can be used in stores and to pay bills online.
The Dallas-based Comerica Bank will issue the cards. ATM withdrawals at 56,000 locations, including at 7 Eleven, and at bank windows will be free, but otherwise, only one withdrawal per month is free. One replacement card per year will be free; others will cost $4.
At financial seminars set up by the Long Island Council of Churches, debit cards and direct deposit have been touted as solutions to rip-offs and other problems for recipients, said Rev. Thomas Goodhue, the nonprofit's executive director. For example, some check cashing places charge 5 percent of the check amount as service fees, Goodhue said.
"There are a lot of seniors who don't have bank accounts and don't have direct deposit because getting access to a bank is a problem for them," he said. Some don't drive anymore, Goodhue said, and certain local communities, especially low-income neighborhoods, don't have banks or have few banking options.
The debit card is Treasury's latest attempt to convince recipients to go electronic. A few years ago, the department started direct deposit and many signed on.
But a survey of Social Security recipients four years ago found that 28 percent did not have bank accounts, and it's a statistic that remains unchanged today, said Alvina McHale, Treasury spokeswoman. Currently, 59 percent of SSI beneficiaries don't have bank accounts.
Last year, in a Treasury pilot of the new card for Illinois' recipients, about 3,100 out of 122,000 people without bank accounts signed up, McHale said.
Still, debit cards will be the wave of the future for government income programs. Federal officials will look at debit cards for veterans, railroad retirees and others.
"We've waited a long time to have an alternative for the unbanked," McHale said. "It isn't just a stepping stone into the financial mainstream. It really is the financial mainstream for a lot of people." |
