Social Security Debit Card
(1/7/08)- The Treasury Department announced that it would issue prepaid debit cards for Social Security recipients in an effort to provide safer and cheaper benefits payments. The card, named Direct Express debit card will be introduced in a handful of states this spring and rolled out nationwide by the end of the summer.
Comerica Inc.'s Comerica Bank, which is Dallas based was selected to issue the card which is targeted at Social Security and Supplemental Security Income recipients who do not have a bank account.
There will be fees associated with the card usage and a significant cost will be incurred in attempting to get the recipients familiar with the program. The Federal Emergency Management Agency offered debit cards loaded with emergency relief funds to hurricane victims in 2005.
The Treasury is hoping to move more and more of its system over to an electronic usage one. In 2005 the department started its Go Direct campaign, which was designed to encourage benefit recipients with bank accounts to switch to direct deposit.
As many as 40 million U.S. households either have no bank account or make little use of banking services, according to an estimate from the Chicago based Center for Financial Services Innovation.
The program will begin in April when the Treasury Department begins mailings to encourage benefit recipients without bank accounts to sign up for the card, and for those with bank accounts to sign up for Direct Deposit.
The card will be automatically loaded on the payment date and can be used immediately. Card holders will be able to use the card at ATMs, bank branches, retail locations and online.
Comerica will earn money on cardholder fees, interchange fees when cardholders use the card at the point of sale, and the float on the funds sitting in the account until it is used. The company estimates that there could be anywhere from 2.5 million to 10 million Direct Express card holders in five years. The company's government card business, begun in 2004, now has over two million card holders.
Card holders will get one free ATM cash withdrawal per deposit per month, but the company will charge 90 cents for each additional withdrawal. Fees may be assesed against the card holder if used at some other bank's or company's ATM machine. Other fees include $3 for international ATM withdrawals, 50 cents for each online bill payment and 75 cents for paper statements.
There will be no fee charged for usage of an ATM machine at machines operated by 7-Eleven and PNC Bank. ATM balance inquiries and cash withdrawals at a teller window will be free, and there will be no fees for overdrafts, declined transactions or inactivity.
Cardholders can receive deposit notifications or low-balance alerts via text message, email or automated phone calls. It costs the government 89 cents to issue a paper check in fiscal year 2006, versus 9 cents for electronic payments. Four million Social Security and SSI recipients do not have bank accounts.
The debit card accounts are protected by PIN numbers and FDIC insurance.
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posted January 7, 2008
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