For the unemployed, prepaid unemployment cards could actually be doing more harm than good according to a new report from the National Consumer Law Center.

Prepaid cards loaded with unemployment benefits can force those holding them to shell out as much as $20 in fees per transaction the organization’s report, “Unemployment Compensation Prepaid Cards” indicated. The report’s aim is to embolden state governments to reduce the number of fees the unemployed pay on their benefits, offer direct deposit options and, in the case of state without prepaid card programs, issue public comment requests for proposals.

The NCLC’s report showed that 22 of the 40 states that issue prepaid cards for unemployment benefits charged at-network ATMs fees while all charge fees at out-of-network ATM machines in addition to any surcharges. The most fees charged by government-issued prepaid cards took the form of overdraft card, according to the report, with five states issuing fees of between $10 to $20 in such fees.

The states with the best unemployment prepaid card services were California and New Jersey, which both issued Bank of America® cards. The worst state according to NCLC’s study were Arkansas, Idaho, Nebraska, Ohio and Oregon, which all use U.S. Bank-issued cards. The full list is available at the NCLC’s official website, along with study results and recommendations.

Government Lean on Prepaid Cards As Means of Reducing Spending:

This past January, the U.S. Treasury Department announced its own plans to pilot prepaid cards as a way for both taxpayers to receive their refunds. The pilot program included 60,000 individuals but is aimed at 1.7 million workers that receive payroll cards across the nation.

Read: U.S. Treasury to Pilot Prepaid Debit Card Program

While the NCLC’s report indicated that prepaid cards offer numerous perks like greater security since large amounts of cash doesn’t need to be carried, and the ability to make traditional debit card payments with ease, it also refuted previous research that’s said prepaid cards offer little if any advantage over traditional bank accounts.

“Prepaid cards can help states eliminate the costs of paper checks and help unbanked workers avoid check cashing fees and the risks of carrying cash,” said NCLC managing attorney Lauren Saunders in a statement. “Yet prepaid card junk fees stack the deck against jobless Americans who need every dollar during a financially stressful time.”

A study of prepaid card released earlier this year showed that prepaid cards users could save as much as $141.65 annually in fees in comparison to those with traditional checking accounts.

Check out: Study: Prepaid Cards Offer Fewer Fees Than Checking Accounts




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