Some unemployed workers may receive unemployment insurance benefits through prepaid debit cards. The states manage the program in arrangement with the banks that issue the cards. The program differs state by state. The cards are for use in A.T.M.s.
A report from the National Consumer Law Center says the program results in consumers paying fees for using their cards. The fees are for:
- Requesting funds that you do not have (overdraft)
- Requesting funds from a bank that did not issue the card (out-of-network)
- Requesting funds more than a certain amount of times
- Checking for the balance in your account
- Requesting funds from a teller
- Inactivity fees for not using the card often enough
The other ways to collect benefits are checks and direct deposit to bank accounts.
Forty states now offer prepaid debit cards. They are trying to phase out the mailing of checks.
The report points out the worst practices. For example, in five states (Arkansas, Idaho, Nebraska, Ohio and Oregon) U.S. Bank allows overdrafts and then charges a fee of from $10 to $20. In other states, the U.S. Bank does not charge for overdrafts.
Another bad example is Tennessee. JPMorgan Chase charges a fee for all withdrawals. The Illinois National Bank does the same in Illinois.
A best practice example is in New York and New Jersey. The Bank of America offers free in-network withdrawals, two free withdrawals from other banks, no balance inquiry fees and no inactivity fees.
Direct deposit into a bank account is the easiest way to make payments. Many unemployed do not have bank accounts. Many do not live near the bank that issues the debit cards.
The debit card and direct deposit are improvements over the mailing of checks. Checks could be lost or stolen.
Advocates say the states must do a better job of telling unemployed workers about the fees.
The United States Department of Labor is in charge of the unemployment program. Each state gets funds from DOL for administration and chooses the bank.