Recipients of federal benefits who receive their payments by paper check have about a year to switch over to an electronic payment method. Under regulations announced by the U.S. Treasury Department in December 2010, all federal benefit payments, such as Social Security, will be paid electronically by March 1, 2013. Paper checks will no longer be an option. Walt Henderson, director of the Electronic Fund Transfer Strategy Division at the U.S. Department of the Treasury Financial Management Service, says the transition has already begun. As of May 1, 2011, anyone applying for a benefit for the first time had to select an electronic payment option.
Electronic payments are a cost-effective option for a federal government that is battling to rein in spending. “It’s estimated over the next ten years that there’ll be a billion dollars in savings and taxpayers will no longer incur that $120 million a year price tag, which is associated with printing and mailing those paper checks,” Henderson says.
Electronic payment is also safer for the nearly eight-and-a-half million beneficiaries who currently receive paper checks each month. Henderson explains: “That’s eight-and-a-half-million paper checks that we mail out and a lot of problems can happen. They can be taken from mailboxes, they can be forged and cashed without permission, and getting payments electronically can protect people from financial crimes like check theft and fraud. In fact, [in 2010] more than 540,000 Social Security and supplemental security income checks were reported lost or stolen and had to be reissued. It’s estimated that there’s cost savings — $93 million in checks issued by the Treasury were fraudulently endorsed in 2010.”
Individuals can still choose how they receive their money. They can sign up for direct deposit to their existing bank or credit union account and the money will go into their account on the morning of the payment date. They can also opt for the government’s Direct Express Prepaid Debit MasterCard, which can be used like any prepaid debit card to make retail purchases and get cash back for no charge. No bank account or credit check is required. The Direct Express prepaid card was designed specifically for federal benefit recipients who do not have a bank account. “It’s fully FDIC insured, it has consumer protections. In fact, we have more than 2.5 million benefit recipients who have enrolled for the Direct Express card since we launched it in 2008,” Henderson says. Information on the fees and features of the card is available at www.godirect.org.
— Salome Kilkenny