Recently in Unemployment Debit Cards Category

Unemployment is one thing, but getting charged to use the prepaid card your weekly benefits are on is another.

Just ask Shawana Busby, the out-of-work resident in South Carolina at the center of Janell Ross' Huffington Post write-up about Bank of America's latest indiscretion: charging the unemployed for using their prepaid cards out-of-network. Busby estimates she's paid about $350 in fees, despite the fact this is all she has to live on.

Bank of America may have just done away with its $5 debit card fee, but with states like South Carolina partnering with big banks to save on printing and mailing costs (an estimated $5 million in South Carolina's case, according to Ross), the unemployed, many of whom are unbanked, are feeling the fallout.

Writes Ross:

"In short, the same banks whose speculation delivered a financial crisis that has destroyed millions of jobs have figured out how to turn widespread unemployment into a profit center: The larger the number of people who are out of work and dependent upon the state for sustenance, the greater the potential gains through administering their benefits."

What do you think, is Bank of America back to its shady old tricks? Or does the bank provide a service to cash-strapped states?

PROVIDENCE, R.I. -- Rhode Islanders attempting to access their food stamp or welfare benefits using a state-issued debit card may have their transactions declined due to a technical glitch, the state Department of Human Services said late Monday.

FIS/EFunds, a company that processes transactions for the debit cards, reports that some attempted transactions are not being processed for Rhode Island.

The state's Supplemental Nutrition Assistance Program (food stamps) and RIWorks (welfare) benefits are distributed primarily through the debit card.

The failed transactions are intermittent, so the state is advising SNAP or RIWorks beneficiaries to try swiping the card more than once if the transaction does not initially go through.

The department reports that the company has a team dedicated to fixing the problem. The department is also working on an interim plan so that beneficiaries can access their benefits.

It seemed like a good idea at the time.

Not long ago, the State of Maine joined dozens of other states in changing the way it gave out unemployment benefits. Instead of checks, the state now gives recipients a choice: They can have their benefits deposited directly to their account, or they can receive prepaid debit cards.

The debit card approach eliminates the cost of issuing paper checks. That can be important for people who do not have bank accounts and so cannot use direct deposit (see Consumer Forum, Dec. 27, 2010). A debit card also is generally less costly to use than a check-cashing service. The card also means recipients are less likely to carry large amounts of cash with them.

A report released this month by the National Consumer Law Center (NCLC) surveys the use of prepaid debit cards for unemployment compensation. A total of 40 states, including Maine, use the cards. The survey shows that card issuers may have very different policies for the various states in which they operate.

When direct deposit is not the recipient's choice, Maine's unemployment compensation is made on debit cards issued by JP Morgan Chase. The state's website explaining the procedure (www.maine.gov/labor/unemployment/mapcard) says fees of 50 to 75 cents may be charged to transfer money from the card to a bank account. That's a new service Chase does not offer in all states, and it is not mentioned in the fee schedule.

Maine is among the states in which card users must pay a fee every time they use a personal identification number (PIN) when buying something. The fee is between ten and 25 cents per purchase. There's no fee if the user signs for the purchase instead of using a PIN.

Card holders get one cash withdrawal per deposit free at any Chase, Key Bank or Allpoint ATM; each withdrawal after that incurs a fee of $1.50. There's a $1.50 fee for a cash withdrawal at other banks' ATMs in the U.S., $3 outside the U.S.

Chase charges a few other fees for various services. Free account statements are available online, but a printed, mailed statement costs 75 cents a month. The state's website also notes that an inactivity fee may be charged if the account is inactive for more than 180 days; however, the amount of the fee is not specified.

The state's website has a list of tips to avoid paying fees. The most important is always to be aware of your balance, so you won't be hit with an ATM denial fee ($1). Users should also be aware that they can't add money to the account; only the state can do that.

The NCLC report lists states with higher fee structures than Maine. It also points out that the millions of unemployed people in the U.S. are among those least able to absorb such fees.

"States need to do more to make sure that unemployed workers get every penny to which they are entitled," the report says.

More than 40 states disburse unemployment and child support payments by prepaid debit card instead of by check. Those cards often come with fees, including charges for inactivity or to simply check the balance at an ATM.

By moving to debit cards, states can save money on paper and postage. In 2010, states paid out more than 53 billion in unemployment and child support to prepaid debit cards, according to figures from research firm Mercator Advisory Group and reported by the Wall Street Journal. That amount is up 33 percent from the year before. In some states aid recipients can choose either a check or debit card, but in others--like Kansas, Indiana and Maryland--debit cards are the only option.

To offer prepaid debit cards, each state has to negotiate its own agreement with banks, which means the number and type of fees can vary from state to state vary. In Indiana, the bank that state does business with only lets recipients make one weekly withdrawal before charging them $1.25 for any additional withdrawals.

Prepaid debit cards are not as tightly regulated by recent legislation as regular debit cards and credit cards. They are also exempt from a 2009 law that banned fees for infrequent use, according to the Wall Street Journal.

--Maggie Shader

CHARLESTON, W.Va. -- A new national report says West Virginians who receive unemployment benefits through debit cards pay some of the highest fees in the nation.

The study by the National Consumer Law Center says West Virginia's program charges $2.75 for cash machine withdrawals and $1.75 if a transaction is denied. Those charges are the highest of their type found among the 40 states that use cards.

The Charleston Gazette reports that the study does give West Virginia high marks for adding direct deposit of benefits, along with debit cards and checks.

The report says debit card programs cost states nothing, but generate transaction fees for banks.

It says California and New Jersey have the best debit card programs, both through Bank of America. Chase's program in Tennessee, meanwhile, has the most "junk fees" for services such as balance inquiries and ATM withdrawals.

Since 2009, WorkForce West Virginia has contracted with JPMorgan Chase to provide the cards. WorkForce spokeswoman Courtney Sisk said about 87 percent of the 97,000 people who get benefits use them.

The cards do have advantages: Users don't have to pay check-cashing fees, and they can pay bills via phone or Internet.

"Yet prepaid cards come with many fees that nickel-and-dime unemployed workers at a financially stressful time," the report says. "Fees can drain precious dollars from families at the very time they need it the most."

The average unemployment payment in West Virginia is just $266 a week, according to the U.S. Department of Labor.

The report says West Virginia could improve things for users by eliminating the 25-cent fee for balance inquiries at out-of-network ATMs and offering paper statements.

It praised the state for offering both not only direct deposit, but also unlimited, free in-network ATM withdrawals.

But Charleston attorney Dave McMahon, who represents low-income people, notes that in many rural areas, it's often difficult to find in-network ATMs.

Florida residents drawing unemployment benefits will have the option of a debit card instead of direct deposit or a check beginning this fall, according to the state work force agency.

The debit card system is expected to save Florida about $317,000 a year, said Robby Cunningham, spokesman for the state's Agency for Workforce Innovation. But critics point to concerns about the agency's ability to make the switch easily, based on its aging computer system, and express concern about potential fees for users.

The agency has contracted with Affiliated Computer Services, a Dallas company that operates debit card systems for 10 states. The unemployed will be able to use the cards at any Wachovia/Wells Fargo or MoneyPass ATM for free.

Unemployed workers also will be able to use the debit cards at any restaurant, store and other locations where Visa-branded cards are accepted. There are no restrictions on what can be purchased with the debit cards and users also will be able to get cash back on purchases without a fee at many locations, Cunningham said.

Harold Pratt, 54, former commodities broker in Coral Springs seeking a management position, said he would prefer his unemployment benefits be deposited in his checking account. "I can check to see that I received the benefits. With a debit card, I won't know it until I go to a machine and find out what's on the card, and then it could say 'insufficient funds,'" he said Tuesday.

The schedule of fees provided by the state work force agency reveals that if someone on unemployment benefits tries to withdraw cash from an out-of-network ATM, the user could be charged $2.25 a transaction, up to a $3 ATM surcharge, and 75 cents to check the balance. However, a user who limits withdrawals from an out-of-network ATM to twice every two weeks won't be charged, the agency said.

When an unemployed worker loses a debit card, there's no fee to replace it. However, additional cards will cost $4 each, with a $14.50 expedited delivery fee, according to the agency's agreement.

If the balance falls to zero on the card, there will be no overdraft fees because the card owner would only be able to purchase up to the available amount on the card, Cunningham said.

Unemployment insurance debit cards have been controversial in other states because of the fees associated with them, taking money out of unemployed workers' pockets when they can least afford it.