Bank Fees on Unemployment Benefits

Losing your job is bad enough, right? Well, the AP has reported that as states partner with banks to dispense unemployment benefits, many recipients find themselves paying a fee to get their cash:

Thirty states have struck such deals with banks that include Citigroup Inc., Bank of America Corp., JP Morgan Chase and US Bancorp, an Associated Press review of the agreements found. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20 - even though they could decline charges for more than what’s on the card.

While cards may provide extra convenience and lower administrative costs, they come at the expense of the unemployed and create a potential boon for banks.

In Missouri, for instance, 94,883 people claimed unemployment benefits through debit cards from Central Bank. Analysts say a recipient uses a card an average of six to 10 times a month. If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000. If half of the cardholders also dial customer service three times in any given week (the first time is free; after that, it’s 25 cents a call), the bank’s revenue would jump to more than $521,000. That would yield $6.3 million a year.

The idea of bank cards shouldn’t be scrapped altogether, since they boost efficiency and save states money. But they deserve another look - especially as the new stimulus plan will increase unemployment benefits by $40. The goal should be to increase efficiency and help the unemployed, not the banks.