Bank Fees on Unemployment Benefits

Thirty states have deals with large banks to deposit unemployment benefits. Many of the banks then issue a prepaid debit card to jobless people. On the surface, it looks like a simple deal. In practice, recipients are finding that accessing their money can cost quite a bit! After the first withdrawal, each transaction carries a fee. The banks make interest off the money that is deposited, and a 1-3% fee from vendors off any transaction made with the cards. The state saves money over writing and mailing checks because the banks will set up the program for free. Banks don’t mind because they make plenty off fees charged to benefit recipients.

In Missouri, for instance, 94,883 people claimed unemployment benefits through debit cards from Central Bank. Analysts say a recipient uses a card an average of six to 10 times a month. If each cardholder makes three withdrawals at an out-of-network ATM, at a fee of $1.75, the bank would collect nearly $500,000. If half of the cardholders also dial customer service three times in any given week (the first time is free; after that, it’s 25 cents a call), the bank’s revenue would jump to more than $521,000. That would yield $6.3 million a year.

Rachel Storch, a Democratic state representative, received a wave of complaints about the fees from autoworkers laid off from a suburban St. Louis Chrysler plant. She recently urged Gov. Jay Nixon to review the state’s contract with Central Bank with an eye toward reducing the fees.

“I think the contract is unfair and potentially illegal to unemployment recipients,” she said.

The easiest way to avoid fees is to withdraw all funds at once from a debit card account, then deposit the money in your regular checking account. Link -via Cynical-C

(image credit: Free Digital Photos)