Over the past several years, New Jersey recipients of federal benefits, such as Social Security disability insurance and supplemental security income, have probably noticed a switch in how payments are received, with direct deposit and prepaid debit cards now being the preferred methods. The goal was for the U.S. Treasury Department to eliminate all paper checks by March 2013.
The reason behind the push was two-fold: To stop checks from being lost or stolen and to save taxpayers money. It was estimated that no longer printing and mailing paper checks would save taxpayers $10 million over the course of 10 years.
To further make the switch away from paper checks, starting in May 2011 new recipients could only choose direct deposit or prepaid debit cards as payment methods and existing recipients were being switched over to the new methods. However, by the March 2013 deadline there were still 3.5 million recipients receiving paper checks.
In looking at the new methods though, there have been issues. For example, while one of the goals of getting rid of paper checks was to reduce the number of checks stolen, it turns out the reliance on direct deposit has led to scams. This is normally done by swindlers attempting to trick people into giving them their Social Security numbers and banking information. This is normally done under the guise of winning a large sum of money.
In addition to the scams, the prepaid debit cards have also proved financially burdensome as there are fees associated with online bill payments, money transfers and ATM withdrawals. These fees can be hard on those living on a fixed income and relying on SSDI or SSI to get by.
These direct deposit and prepaid debit card issues were recently brought up at a Senate Special Committee on Aging. The hope is that bringing up these issues will lead to solutions.
Source: Mainstreet.com, “Are Fees, Fraud Eating Away at Your Social Security?” Shelby Bremer, Credit.com, July 1, 2013