Government Prepaid Debit Card Program Questioned - Other News


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Other » Government Prepaid Debit Card Program Questioned

Government Prepaid Debit Card Program Questioned

Government Prepaid Debit Card Program Questioned
The content is accurate at the time of publication and is subject to change.
This content is not provided by Citi. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the Citi.

Prepaid debit cards have replaced paper checks for millions of Social Security and Supplemental Security Income (SSI) recipients since the government switched from paper to plastic payments. But not everyone is happy with the change.

The U.S. Senate Special Committee on Aging recently held a hearing to determine whether seniors are being well served by the prepaid debit card program. And a recent investigation by the Center for Public Integrity (CPI) says that the program may not be good for poor people who rely on SSI payments.

Electronic payment savings

As of March 2013, the U.S. Treasury Department stopped issuing paper checks to Social Security and SSI recipients. Over the last few years, benefit recipients have been encouraged to sign up for direct deposit to their bank accounts, saving the government millions of dollars.

It costs about $1.05 to process and mail each benefit check, while electronic payments cost an estimated nine cents each. There are nearly 58 million Americans receiving Social Security alone.

The push to direct deposit was largely successful. By 2010 more than 85% of government payments were electronic. But not all government recipients have bank accounts, and the solution for unbanked customers was to receive electronic payments via prepaid debit card.

Fees scrutinized

The government contracted with Comerica Bank to issue the DirectExpress Debit MasterCard for Social Security and SSI recipients. Anyone can sign up for one, whether or not they have a bank account. Part of the problem with this, according to the CPI, is that people who do have bank accounts would be better advised to choose direct deposit rather than the fee-laden DirectExpress prepaid card.

The CPI says the fees associated with the card are too high and present an unfair burden to poor and elderly people receiving benefits. The DirectExpress prepaid card charges 75 cents for a paper statement, 90 cents for each ATM withdrawal after the first free one each month, and $1.50 to transfer funds to a bank account.

Big business of prepaid

One thing is not up for debate: prepaid cards are big business. Comerica has issued more than four million DirectExpress cards and is the second-biggest issuer of federal government prepaid cards. State governments also use prepaid cards for benefit payments; other issuers include Bank of America, Chase, U.S. Bancorp and Citigroup.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

Chase Adopts New Fee Disclosure
Chase Adopts New Fee Disclosure

Posted: March 11, 2014

People applying for a Chase Liquid prepaid card are the first to get a peek at the new disclosure form that aims to make terms and conditions clearer and fee schedules easier to understand. Continue reading

Visa Ups the Ante for Prepaid Cards
Visa Ups the Ante for Prepaid Cards

Posted: June 13, 2014

It’s easy to unknowingly rack up fees when you’re using prepaid cards, but Visa aims to change all that by rolling out new standards for cards carrying its logo. Continue reading

Green Dot Takes Over Walmart MoneyCards
Green Dot Takes Over Walmart MoneyCards

Posted: June 12, 2013

Green Dot Bank is acquiring the Walmart MoneyCard program from GE Capital Retail Bank and becoming the sole issuer of the popular reloadable prepaid cards. The deal is expected to become final later this year. Continue reading

Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
Introducing the New Citi Rewards+ Card - the only credit card that automatically rounds up to the nearest 10 points on every purchase - with no cap
For Excellent, Good Credit
Enjoy 70,000 bonus miles after spending $5,000 on purchases in the first 90 days
For Good/Excellent Credit
See Rates & Fees
Perfect credit not required for approval; we may approve you when others won’t
For Fair/Bad Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!