Social Security Disability Insurance Recipients Need Better Understanding Of Pro

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Social Security Disability Insurance Recipients Need Better

Understanding Of Pros And Cons Of New Debit Card, Allsup Says (USA)

http://www.medicalnewstoday.com/articles/102020.php

Starting next month Social Security Disability Insurance recipients

in some states will have the option of receiving their benefit

payments electronically on a debit card, rather than via a paper

check. However, eligible individuals - many of whom are " unbanked " -

should have a clear understanding of the pros and cons of opting for

the debit card, particularly the financial ramifications, according

to Allsup, which represents tens of thousands of people in the Social

Security Disability Insurance (SSDI) process each year. It also

offers services that support the financial and health well-being of

individuals with disabilities.

" Before signing on to or totally dismissing the idea of the debit

card program, potential cardholders should look at how they are

likely to use a card, " said Gada, personal financial planning

director of the Allsup Disability Life Planning Center. " For some,

the card may make sense. For others, they may realize after looking

at their spending habits that getting a bank account may really be

the best option. And there will be others that will always operate

with cash only, regardless of the drawbacks it presents. "

The debit card program, called Direct Express, is run by the U.S.

Treasury Department through Comerica Bank with the intent to

encourage Social Security recipients who do not have a bank account

to elect to have their benefits loaded electronically onto a debit

card. The Direct Express program will be introduced this spring in

Arkansas, Louisiana, Oklahoma and Texas before being phased in across

the nation during the summer.

The cost savings for the government could be significant, based on

estimates from the Treasury's Financial Management Service. For

example, it cost 89 cents for the government to issue a paper check

in 2006 compared with 9 cents to process an electronic payment. As a

result, if the 4 million recipients of Social Security, SSDI and

Supplemental Security Income (SSI) who don't have bank accounts were

to sign up for the debit card, the savings could be $44 million

annually.

Having monthly benefits electronically deposited onto debit cards

also has its advantages for recipients, most notably convenience and

security. In the case of individuals with disabilities who may have

limited mobility, for example, having the debit card would mean that

they would not have to make a special trip to cash their SSDI award

or be concerned if they were hospitalized or otherwise unable to

retrieve their benefit payment when it was due to arrive.

Additionally, funds on the card are FDIC insured, just like money in

a bank account, so the money is fully protected if the card is lost

or stolen; though a card replacement fee will be assessed the second

time a card needs to be replaced in any given year.

Evaluating the Costs

While cost savings for the government - and taxpayers - are obvious,

the cost savings may not be as clear-cut for debit-card recipients.

They might end up paying even more in transaction fees than the

average $6 to have a paper check cashed, especially if they don't pay

attention to how they're using the debit card.

Among the questions Gada recommends potential cardholders consider

before signing up for a debit card include:

- How accessible to you is an ATM in the Comerica network?

- How often would you make ATM withdrawals and would those ATM

withdrawals be at in- or out-of-network ATMs?

- How often would you use the electronic bill payment feature?

- Will the companies you are paying electronically charge you a fee

for electronic payment?

- Is there a bank in your area that could provide you with a more

cost-effective solution for the features you want, such as ATM,

electronic bill pay or direct debit?

- If you are concerned about opening a bank account, why is that and

have you spoken with a local bank to see if they can help alleviate

your concerns?

Social Security recipients participating in the Direct Express

program are allowed one free ATM cash withdrawal per month from a

designated ATM. They are assessed a 90-cent fee for each additional

ATM withdrawal. Cardholders may be charged an additional " surcharge

fee " by ATM owners outside of the Comerica Bank network, which issues

the debit cards. Additionally, program participants have access to

online bill payment for a fee of 50 cents per online bill payment and

can receive a paper statement for a 75-cent monthly fee.

Gada advises potential cardholders to consider how they would use the

debit card, looking at the trade-off between potential costs and

benefits. For example, rather than having to pay for a cashier check

or carry large amounts of cash and pay bills in person, incurring a

small transaction fee for electronic bill payment may be worth it,

particularly for individuals who have a difficult time getting

around. However, he noted, individuals should check to see if the

organization they are paying will assess an additional charge for

accepting electronic bill payment.

On the other hand, individuals who are going to head for an ATM every

time they need cash will find transaction fees quickly adding up to

little added value.

" In these cases, it's time to seriously consider what is preventing

you from getting an account at your local bank, because that probably

would be your best option, " said Gada. " Many banks offer no minimum

balance checking accounts where you can have your Social Security

benefits direct deposited and electronically pay bills or use their

ATMs at no additional charge. "

Overcoming Banking Barriers

One of the reasons that some Social Security recipients continue to

insist on paper checks is the fear that their bank accounts could be

attached by creditors. However, under federal law, Social Security

benefit payments are protected from attachment, meaning creditors do

not have the right to take these funds from a recipient's bank

account. The same rules will apply to funds placed on Direct Express

debit cards. There are a few explicit exceptions to the rules

guarding against attachment of Social Security benefits. For example,

Social Security funds can be taken to pay child support or alimony

payments the individual owes.

" At any given time, there are likely millions of dollars in Social

Security payments that are at risk because people on fixed incomes

got into debt or are having a dispute with a creditor, " said

Gada. " Unfortunately, they are acting on inaccurate information that

has them afraid to put their money into bank accounts where it can be

protected and they can be afforded other benefits of being banked. "