Right now, two things many people are getting in debit card form are unemployment benefits and tax refund anticipation loans. But before taking money on a handy debit card, take a minute to look over the potential fees you’ll run into.
Unemployment Benefits on Debit Cards
CNN recently had an article on Pennsylvanian unemployment benefits fees for debit cards. If you’re getting your PA (or many other states’) unemployment benefits on a debit card, rather than waiting for a check, there are a number of fees you need to be aware of. For example, in PA a balance inquiry costs 40 cents. Having the card denied costs 50 cents. Having the account accessed by telephone costs 35 cents. Using an out-of-network ATM costs $2-3.
This isn’t too different from having a debit card, depending on your bank’s policies, but the problem is that people are thinking of this more as accessible cash than as having another bank account. You should be able to do most normal transactions without fees, but take the time to be aware what you can and can’t do for free. And if that’s more limiting than having the money in your normal bank account is, consider opting for the checks instead.
The advantage of the card is that you don’t have to wait for a check to arrive or go to the bank (or pay a fee at a check-cashing location) to cash it. As long as you’re getting benefits, it automatically recharges.
Are these fees evil? I don’t think so, I see them as part of having what’s essentially a bank account. But if you’re already at a bank that offers better options, you may want to stick with checks.
Tax Refund Anticipation Debit Cards
While on the subject, I wanted to highlight tax refund anticipation debit cards. The only one I’m familiar with is H&R Block’s Emerald Card, but there may be others. A number of tax assistance centers will also offer a loan based on the refund that you’re supposed to get from the IRS. The idea is that you can get your money right away instead of later.
Even if you’re not getting it on a debit card, I think these loans are crap. They’re only a good idea if you’ve found yourself in a desperate situation and are willing to pay the fees to have the money now. If you don’t need the money to pay for necessities, you’re much better off just waiting for your refund and getting the whole thing.
Additionally, H&R Block offers these refund anticipation loans on debit cards. Like the unemployment benefits debit cards, these ones also come with certain fees (plus the fees up front, like you would have on any refund anticipation loan). For example, “the fee is just $1.95 per transaction when using ATMs in the U.S. and $2.50 per transaction when traveling abroad.” Yay? At least getting cash back with your purchase still doesn’t cost anything.
Know the Fees
I’m not a fan of the Emerald card, but I can more easily understand why someone might want to opt for their unemployment benefits in a debit card form. It’s faster, it can be used right away, you don’t need to have a bank account. As with everything, make sure you understand the fees you may be charged and the places you can and can’t use it before you find fees start eating up your money.
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Thanks for this great post. It’s a good reminder that, most of the time, when we opt for greater convenience we also opt for fees.
Getting your unemployment on a debit card seems so counterintuitive to me. I w0nder who is making the money from the fees on those cards. Is it the state? Is it some third party? If the state is making the money then it in fact is much like another tax and that’s very sneaky indeed.
I hope that people read those disclosures and know what they’re getting into when they sign up for those cards. It’s NEVER free.
Just a quick addition to the post. The Emerald Card at H&R Block can also be used to put your refund on it. It’s not just for the loans. So, if you do not have a bank account, it can be a good thing. I do agree with you on the loans though. They are a ripoff!
Just out of curiosity, in the year two thousand and nine, who in the bloody heck doesn’t have a bank account? I just can’t see that as a valid positive when it comes to these types of cards. If you don’t have a bank account, get one. Takes about 4 minutes, and it’s free. And then there are no funky card fees to be worried about.
I have The Emerald Card from H&R Block. I took the card because I can load more money if I want to use it, after my refund is gone. I use it as a debit card and get cash back from time to time at the cashier. It is my emergency funds. I only paid $29. 95 extra for the card. They took the pre fees out of my refund. It was very convenience.
If you go into the bank and use the card for a cash advance (any debit card linked to a bank account) usually you don’t get charged any fees. It’s crazy how the fees on prepaid debit cards can eat up balances!
I have to disagree with the point that those fees are evil on the unemployment card. If you’ve been laid off, the last thing you want to worry about is the state nickel and diming you to death! Banks don’t charge those stupid little fees on the debit card. You get charged for using another bank’s ATM – whether withdrawing or checking a balance – but beyond that, it’s pretty much free to use a debit card, even as a cash advance. The better option is, of course, to wait for the check. But these cards are supposed to be cheaper for the state, so I don’t understand the need to charge the little fees.
@ Llama Money – There are people who still don’t have accounts and part of it is because a.) they don’t have a SSN or ITIN to open the account with, or b.) they’re on chexsystems or Telecheck for account abuse with another bank and no one will open an account for them. Even in 2009, there are reasons people don’t have checking accounts. But, there are some people who simply choose not to have one and I think that’s kind of strange. It does make life easier and saves you from PAYING to cash checks, so in that respect I completely agree with you!
Hunh, being from PA and currently getting unemployment, I feel I should comment. Currently, PA only offers two options for unemployment disbursement, applying the funds to the debit card or direct depositing them into a bank account. There’s no option to get a paper check any more, regardless of your desire.
As for the fees and other expenses, they are all laid out on a form that comes with the debit card (the card was actually attached to it), in both English and Spanish. This paperwork also has the activation number for the debit card on it, so they’d be pretty hard to miss. While I agree that some of the fees could nickel and dime your benefits away, the unemployment people allow you to do many things (make purchases, withdraw the money from select ATMs, ALL counter withdraws, etc.) without any fees at all.
As for who makes money from the card fees (Sandy’s comment #2), the card is a MasterCard Debit card issued by Comerica Bank. The free ATM withdraws are offered by PNC and Wachovia. I’d imagine that most of the fee money goes to one (or more) of those four companies, rather than to the state. (Although, obviously any out of network ATM fees would go to the out of network bank.)
And, just as an aside, I’m getting my benefits directly deposited into my checking account; it’s made it easier to transfer to my ING account and allowed me to completely bypass these fees.
Considering Roger’s points, why wouldn’t you not worry about all that nickel and dime garbage and just have it directly deposited into your checking account?
my brother who died 6/22/09, account was always short, called#. had preauthorizations of 29.95 daily from 6/15 to 6/19, and those of only 10 last transactions, what is a preauthorization settlement and preauthorization transaction, tried to call pa umemploymentd (didn’t know) then card debit card unable to get through to any live person
I currently receive unemployment in the state of Kansas. A prepaid debit card from Citibank is the ONLY option. It works as long as you know the rules. For example, I am allowed 1 free ATM withdrawl. All others carry a fee. Cash back after purchases are always free. As long as you plan your bills for the week, you can get away without paying any fees.
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