In the wake of the economic downturn, state unemployment agencies are trying to cut costs. States, such as Arkansas, Idaho, Nebraska, Ohio, Oregon, California, New Jersey and, most recently, Wyoming, have begun to use debit cards to dole out the unemployment money that those without jobs are collecting. In total, about 30 states offer the unemployed the option to collect their money on a prepaid debit card. Without having to cut and mail checks, states save some significant green. The problem is that debit cards often cost the unemployed more money—money they already don’t have enough of without a job.
While it is convenient for the unemployed to have their benefit money loaded onto prepaid debit cards that they can use to make purchases and pay bills, the fees associated with using debit cards is zinging some of the cardholders in a big way. A transaction fee is one of the pitfalls for unemployment debit cardholders. The transaction fee is debited from the balance on the card each time the debit card user withdraws money from an ATM that is not owned by the card issuer. The average transaction fee costs $1.50.
The fees are not universal for all of the debit cards, so unemployed individuals need to read and understand the terms and conditions of using their particular cards. While transaction fees occur when making cash withdrawals, debit cardholders may also get hit when making purchases with the card. Some cards assess a fee each time a balance check occurs or for reaching out to the customer service department of the bank that issues the card. Overdraft fees are also possible on the cards. The bottom line is that these prepaid debit cards work in a similar fashion to traditional bank debit cards, which means that fees may apply.
The Best and the Worst
According to a study done by The National Consumer Law Center, some of the state unemployment debit card programs are better than others. Unemployment debits cards issued by U.S. Bank seem to be the worst for users. U.S. Bank issues the debit cards for the states of Arkansas, Idaho, Nebraska, Ohio and Oregon. These cards carry the highest overdraft fees, which range from $20 to $30 a pop. The same survey touts California and New Jersey as having the best debit cards for the unemployed. The issuer of these cards is Bank of America.