For millions of Americans, getting a paper check from Social Security or SSI in the mailbox each month is a regular ritual. In the Sacramentoregion, about 65,000 of those government-issued envelopes arrive every month.
But in the last year, the U.S. Treasury has been quietly campaigning to get Social Security and Supplemental Security Income recipients to switch to a plastic, prepaid debit card.
The program, called Direct Express, is aimed primarily at the 4 million Social Security and SSI recipients who don't have a regular bank account. But it's available to anyone. Instead of a paper check, the plastic card is automatically loaded with the amount of your monthly Social Security or SSI check.
It's billed as a safe, convenient way for consumers to get their monthly government income while preventing fraud, theft and loss of paper checks.
The other alternative to paper checks, of course, is direct deposit into an existing bank account, which has been a long-standing option.
Every year, the U.S. Treasury receives 1.4 million complaints from Social Security and SSI recipients.
"Those paper checks are problematic. They get lost, stolen or aren't received on time," said Phil Belisle, regional director of the U.S. Treasury's financial center in San Francisco. "The debit card is a very safe alternative."
It's also a big money-saver for the federal government.
"In California alone, we could save $9.5 million a year if we were able to stop mailing those 840,000 SS and SSI checks," said Belisle.
If every Sacramento-area recipient converted to a prepaid debit card, the annual savings would be almost $750,000, Belisle estimated.
The Direct Express debit card is tied to the Comerica Bank ATM network, so it can be used without charge at any of its companion banks. Every cardholder is entitled to one free ATM withdrawal a month.
To avoid the fees, a Direct Express card can be used at most retail locations, such as grocery stores and pharmacies, where you can get cash back, or at banks and credit unions that accept the MasterCard debit card.
And like any debit card, it carries some of the same protections against losses if it's stolen.
But there are some fees. If you want a monthly paper statement, there's a fee. If you make more than one ATM withdrawal per month, there's a fee.
Belisle said the Treasury "worked hard to keep the amounts lower than the typical debit card," noting that the Direct Express ATM withdrawal fee is about 90 cents, compared with some regular debit cards whose ATM fees run as high as $3 per transaction.
Since the program started early last year, about 500,000 Americans have signed up for Direct Express debit cards. And they're apparently happy with them. According to the Treasury's recent survey, roughly 95 percent of those surveyed said they're very satisfied, and the vast majority said they would recommend them to friends and family.
"It's a wonderful accomplishment for those who have taken themselves out of that problematic world of government checks," said Belisle.
Another advantage: It's treated just like any other debit card. If it's stolen, you'd have the same protections as with any other credit cards.
For more information, contact the U.S. Treasury at (877) 212-9991 or online atwww.usdirectexpress.com
'Convenience checks'
The Federal Deposit Insurance Corp. is urging consumers to be wary of those so-called "convenience checks" that arrive with your credit card statements.
You know them: the blank checks conveniently printed with your name and touted as a way to write yourself a little loan, pay off an extra bill or splurge on a little extra spending.
While oh-so-tempting, those "convenience" checks carry some risks.
"It's not just a way to write yourself money," said Luke W. Reynolds, the FDIC's community outreach chief in Washington, D.C. "It's like any other credit card transaction. You're essentially borrowing money (against your credit card) … that has to repaid."
And the cost can be fairly significant.
Every time you write a convenience check, it's treated just like a "cash advance" on your credit card. That means there's a transaction fee, usually a percentage of the check amount. So if it's a 5 percent fee and you write a $1,000 convenience check, you'll pay $50 just for the privilege of signing your name.
You'll also be hit with hefty interest rates, as much as double the normal APR (annual percentage rate) on your credit card.
Reynolds also advised being aware of:
Hidden costs. Convenience checks can trigger overdraft fees if you deposit them into your checking account and have exceeded the cash advance limit on your credit card. You can also run into trouble if you write convenience checks to pay a utility bill or a boutique – and then discover the retailer doesn't accept them. In those cases, you could be hit with returned-check fees from other banks and over-limit fees from your credit card issuer.
Less protection. When you make a credit card purchase, you have some protections granted by the Fair Credit Billing Act, such as refunds for defective merchandise. Not so when you pay with a convenience check, even though it's tied to your credit card.
And when using convenience checks, you typically don't earn the bonus points and other perks that rack up on rewards-based credit cards. In other words, don't think you're earning airline miles on your Southwest Visa card when you write a convenience check.
Shred 'em
If you don't plan to use the checks, run them through a shredder. The FDIC says the blank checks could be tempting to dishonest friends, relatives or workers in your home.
Better yet, call your credit card company and request they stop sending the blank checks. Not only is it saving paper, but you're eliminating the financial temptation to yourself – or anyone else.
No comments:
Post a Comment