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Social Security to offer benefits via debit card

Recipients who don't have a bank account can have their payments credited to a special MasterCard.

June 10, 2008|Kathy M. Kristof | Times Staff Writer

The government plans to announce today that it will offer MasterCard debit cards to the estimated 4 million Social Security recipients who don't have bank accounts.

Instead of getting a paper check, a recipient's monthly benefit would be electronically transferred, at no cost, to the debit card's balance. Using the card to make purchases would be free, as would one ATM withdrawal a month.

"It's safer, more reliable and less expensive than writing checks," said Judith Tillman, commissioner of the Treasury's Financial Management Service, which handles Uncle Sam's checkbook. "This is great public policy and great use of a product."

Switching from paper checks to the debit card would save recipients -- and taxpayers -- a fair amount of money. It costs the government 88 cents more to send a paper check than it does to transfer money electronically. And people without bank accounts pay on average $6 to cash a check, according to the Treasury Department.

Plus, the card would save recipients the inconvenience of dealing with checks that are lost, stolen or delayed in the mail.

"Those of us who are used to having access to bank accounts don't realize how costly it can be for those who are unbanked," Tillman said.

Although most recipients have their monthly benefits deposited directly into their bank accounts, the government still mails about 10.5 million Social Security checks a month to retirees as well as to younger recipients of a federal program for the disabled called Supplemental Security Income. Of those 10.5 million, the government estimates, 4 million have no bank accounts.

The debit card service, called Direct Express, is being launched through Dallas-based Comerica Bank. The Treasury has been testing the service since April with about 14,000 recipients.

The card can be used for purchases, including getting cash back, at any retail location that accepts MasterCard. The card owner's account balance can be checked online or by phone. There is no annual fee.

Some services and transactions do carry fees. Receiving a paper statement, for example, costs 75 cents a month. ATM withdrawals after the first one cost 90 cents. And there are surcharges for using the card in a foreign country.

The card program is voluntary, and Treasury officials said they had no plans to make it mandatory.


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