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)

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Wait, the banks collect the interest on the accounts until the recipient withdraws it from the card? IANALoA but I'm pretty sure that's illegal, it's your money from the time the state deposits it, the bank taking the interest is tantamount to theft.

And charging anything for customer service is just plain wrong, if you are a customer then it is their obligation to help you with anything related to the business transaction... I feel sorry for those in states that do everything possible to keep them from opting out of scams like this.
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I'm with Tony - I file online every week, yet they insist on mailing me a form every week. For a while, I was getting 3-5 mailings from them weekly. Unnecessary expense! They should at least let you opt out; it's my own damn fault if i forget to file.
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Yeah, my state just gives you an unemployment check, or a direct deposit into the account of your choice. It treats unemploment deposits like any other kind of deposit, into a normal checking account.
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