Direct Express

April 19, 2012

Starting next year, the federal government, which issues 73 million payments a month, is phasing out paper checks for all benefit programs, requiring people to get payments electronically, either through direct deposit or a debit card for those without a bank account.  The changes will affect people who get Social Security, veterans’ benefits, railroad pensions and federal disability payments.  About 90 percent of people who receive federal benefits already get their payments electronically, and new beneficiaries were required to get payments electronically starting last year, and with a few exceptions, the rest will have to make the switch by March 2013.

Representatives from the Treasury Department maintain that electronic payments are safer and more efficient than paper checks; citing the more than 500,000 federal benefit checks were reported lost or stolen in 2010. The switch will save the government about $120 million a year. Social Security will save $1 billion over the next decade, according to the Treasury Department.  Further, paper checks with personal information are more susceptible to fraud versus an electronic payment.

Advocates for seniors say they understand the government’s desire to cut costs and take advantage of technologies that most workers already use. The food stamp program switched from paper coupons to debit cards in 2004, but they have raised concerns about requiring the switch for older retirees who may not be used to electronic payments.  The Treasury Rule that mandates electronic payments exempts current beneficiaries who are 90 and older from switching.  Individuals may also request a waiver if using a debit card would impose an extreme hardship.

AARP has concerns about fees associated with the debit cards. The Direct Express cards are issued by Comerica Bank, Treasury’s financial agent. Each month, benefit payments are added to the cards, which can be used to make purchases or withdraw cash from ATMs. There are no fees for using the debit card to make purchases. They can be used at any retailer that accepts MasterCard debit cards. If a card is lost or stolen, the beneficiary is protected from unauthorized use as long as the missing card is reported promptly.  Cardholders can make one free ATM withdrawal each time a payment is registered in the card. Subsequent withdrawals will cost 90 cents each, and all withdrawals may be subject to fees by the owner of the ATM.

The government’s switch to electronic payments also comes with a side effect: less business for the U.S. Postal Service, an agency that is already facing big budget problems with the rise of email and electronic bill paying.  The private sector has been migrating to electronic payments for years, costing the Postal Service millions of customers, said Alan Robinson, editor of the Postal Journal, a trade publication.

The government has created a website, www.GoDirect.org and a toll-free phone number, 1-800-333-1795, people can call for assistance.

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