The Social Security check is about to go the way of the door-to-door salesman and Green Stamps. Beginning March 1, 2013, paper checks for U.S. government benefits will virtually disappear
February 19 2013
by Susan Lahey
The Social Security check is about to go the way of the door-to-door
salesman and Green Stamps. Beginning March 1, 2013, paper checks for
U.S. government benefits will virtually disappear. After eight years of
trying to get beneficiaries to switch to digital payments voluntarily
through its Go Direct campaign, the Social Security Administration (SSA), the Veterans
Administration (VA) and other federal agencies that pay out benefits are
now requiring the change.
If you or someone you know is among the 5 million Americans still
receiving Social Security or Supplemental Security Income (SSI) benefits
by check, you can either enroll in direct deposit or sign up to get
your money loaded onto the Direct Express prepaid debit Mastercard . Do nothing and the SSA will send you urgent letters, and eventually may send you the debit card by default.
The electronic shift is intended to save taxpayers more than $100
million a year, and to eliminate theft of paper checks from mailboxes.
But it comes with its own challenges, not the least of which are
confusion and physical difficulties for the elderly and disabled.
“For some, direct deposit or a debit card may be convenient, but for
others, those options may be less affordable or harder to use than
receiving a paper check,” says Cristina Martin Firvida, AARP’s director
of consumer affairs and financial security.
Bank accounts lessen difficulties
If you’re already successfully managing your own money and have an
account at a bank, credit union or savings and loan, changing to direct
deposit requires no real behavior shift. The deposit is made on the same
day each month and the funds are instantly available. The only thing
that’s different is that you don’t have to deposit a physical check.
“When discussing this, we were sensitive to the fact that a lot of
older people may not be comfortable with electronic payments,” says Walt
Henderson, director of the Go Direct campaign for the U.S. Treasury.
“There’s a lot of misconception that they have to get a computer or have
to get on the Internet. It really doesn’t change anything they’re doing
except they have to make one less trip to the bank.”
That makes sense for Leslie Straw, social services designee for
Pioneer Lodge, a nursing home in Coldwater, Kan. As a representative
payee — a person who manages funds for benefit recipients who are
unable to do so themselves — Straw finds the new system beats the old
one.”Direct deposit works better for me,” she says. “It makes keeping
track a lot easier.”
Direct deposit fears
Still, Straw concedes that the change stresses out some senior
citizens who like to hold a check in their hands. Many are uncomfortable
with digital payments and fear their money will get stolen or diverted.
That’s certainly a possibility. In September 2012, Social Security Administration Inspector General Patrick P. O’Carroll Jr. testified that between October 2011 and August 2012, his office received nearly
20,000 reports concerning questionable direct deposit changes to Social
Security beneficiaries and redirection of benefits to other accounts. He
said his office was continuing to get about 50 such reports a day. Some
were due to mistakes by the beneficiaries or banks. Many were related
to identity theft.
The SSA is trying to tighten security controls, but as payments move
from the mailbox to digital delivery, thieves are likely to find more
high-tech ways to steal payments. Frequently, the beneficiary gives the
criminal just enough information over the phone to enable the hacker to
But it’s not as if paper checks are safe. In fiscal 2010, more than
540,000 paper Social Security and SSI checks were reported lost or
stolen according to the Treasury Department. It investigated nearly
50,000 cases of altered or fraudulently endorsed checks, totaling around
$93 million. Those numbers suggest that direct deposit is the safer bet
as long as retirees know how to protect their digital information or
have someone do it for them.
Cards for the unbanked
Bigger changes are in store for beneficiaries who don’t have a bank
account — about 6.6% of Social Security recipients, according to statistics compiled by the Federal Deposit Insurance Corp. The SSA is encouraging them to open bank accounts and enroll in direct deposit. But some may be unable or unwilling to do so.
For example, the FDIC report found that the majority of people
without bank accounts don’t think they have enough money to make an
account economically feasible. Henderson of Go Direct says others have
legal issues that preclude them from opening an account or mental
disabilities that make banking nearly impossible.
The alternative to opening a bank account for direct deposit is the
Direct Express prepaid card. About 3.5 million beneficiaries are already
using Direct Express, Henderson says. The card is automatically loaded
every month with benefit funds, which can be used anywhere a MasterCard
debit card is accepted, including online. Cardholders can make
withdrawals at an ATM, get cash back from retailers and pay bills with
However, the most vulnerable unbanked beneficiaries may find learning
a new financial system overwhelming. There is a lot of information to
absorb, ranging from which merchants accept the card to what fees might
be charged to how to keep track of finances in a digital world.
“AARP believes retirees and other Social Security beneficiaries
deserve to know that their hard-earned benefits will be safely delivered
without risking high fees,” says Firvida. “That’s why AARP has
submitted comments, met with the administration and advocated on behalf
of older Americans to ensure that reforms meet the needs of those
Direct Express debit card fees
The Treasury has negotiated with the card provider to minimize fees.
In the meantime, the agency is enlisting everyone involved — bankers,
representative payees, family members and caregivers — to help
beneficiaries make the change.
The prepaid debit card fee comparison chart below may help. Compared with other prepaid debit cards on the market,
Direct Express is competitive. There’s no activation fee or monthly
service charge. You get one free withdrawal each month from an
in-network ATM. After that it costs 90 cents — cheap, compared with $2
or more for subsequent withdrawals on commercial prepaid cards. Direct
Express’s surcharge-free ATM network includes Comerica, Charter One,
Privileged Status, Alliance One, PNC Bank, MasterCard ATM Alliance and
Using an out-of-network ATM for Direct Express, however, can be
expensive. ATM owners may charge several dollars for each withdrawal. Go
outside the US and fees get even higher — $3 per withdrawal plus a 3%
There are other considerations, too, including usage limitations. For
example, buying gas with the card requires a visit to the attendant.
The card won’t work at the pump. Other restrictions can be found in the Frequently Asked Questions section of the Direct Express website.
Another concern with the debit cards is what happens if they get lost. A federal rule called Regulation E holds that if debit card owners report their cards lost or stolen
within two days of realizing what’s happened, they can only be held
liable for $50 worth of fraudulent charges. After that, they can be held
liable for up to $500. For most cards, liability increases again after
60 days. Direct Express holders get 90 days to report their cards
missing or stolen before their liability goes over $500.
If you have a parent, patient or friend who is prone to losing things
and forgetting about them, this could become an expensive problem.
Some people are exempt from having to give up paper checks — but very few. They include:
- People older than 91.
- People with mental issues that prevent them from being able to make the switch.
- People in rural areas without direct deposit capabilities.
Since the agency began pushing the Go Direct initiative in January
2011, Henderson says roughly 100,000 people have applied for an
exemption. Most of these, he says, were just uncomfortable with the
change, and Social Security staff members were able to help them
understand the new system and transition their accounts. A very small
percentage is granted a waiver.
One way or another, for most beneficiaries, the change must come.
Additional fees for the Direct Express card include .75 cents each
month for a paper statement, $1.50 each time you transfer funds to a
bank account and $13.50 for overnight delivery of a replacement card. To
keep your card fees low, Direct Express offers some tips:
- Use a Direct Express surcharge-free network ATM for all withdrawals,
if possible, to reduce additional ATM fees. You can use the Direct Express ATM locator to find one near you.
- Pay for items at retail outlets with your Direct Express card instead of using cash.
- Get cash back when paying with your Direct Express card using your PIN number at retailer checkouts.
- Financial institutions displaying the MasterCard acceptance mark can give you cash from your Direct Express card for free.
- Money orders can be purchased for a nominal fee ($1.20 for amounts less than $500) at your local post office.