Fourteen thousand federal-benefits recipients have chosen to receive their funds electronically in prepaid debit card accounts instead of by paper check since the U.S. Department of the Treasury's Financial Management Service began promoting the option in 10 states earlier this year.

The MasterCard-branded debit cards, known as Direct Express cards and issued by Dallas-based Comerica Bank, are available to any federal-benefits recipient who requests them, but "we are staggering the marketing in order to ensure a manageable process," Judith Tillman, Financial Management Service commissioner, tells ATM&Debit News.

The bureau began marketing the cards in April to check recipients in Arkansas, Louisiana, Oklahoma and Texas, each of which has a large number of residents who receive benefits checks. Earlier this month, the bureau began promoting the debit cards in Alabama, Florida, Georgia, Mississippi, North Carolina and South Carolina, which have a relatively high risk of weather-related disasters, says Tillman.

"We are doing the remaining 40 states and territories at eight to 12 states per month, depending on state size," she says. The bureau's goal is to alert all 10.5 million Social Security and Supplemental Security check recipients to Direct Express through informational inserts with their checks by October, says Tillman. The bureau also intends to launch a public-education

campaign promoting debit card literacy through print and Web materials, direct-mail campaigns and public-service announcements.

The Treasury's goal with Direct Express is to reduce the number of checks disbursed to unbanked recipients and lower costs associated with disbursing checks, which include postage, paper and reissuing lost checks. In 2007, 700,000 Social Security and Supplemental Security check recipients reported their checks lost or stolen, and the government had to reissue the payments, says Tillman.

Some 4 million unbanked individuals receive Social Security and Supplemental Security benefits, and the bureau expects to save $42 million annually if they convert to the prepaid debit card, says Tillman. It costs the bureau 98 cents to send a check versus 10 cents for a direct deposit, she says. "If we can hit the benefits recipients and get them to switch to direct deposit or debit card, we will dramatically cut the cost to the taxpayer," adds Tillman.

In 2009, the government will load more funds onto Social Security debit cards than consumers will load onto open- and closed-loop gift cards and other financial-services products, says Tim Sloane, director of Debit Advisory Service at Waltham, Mass.-based Mercator Advisory Group. Sloane predicts Social Security load amounts will reach $18.7 billion in 2009. "The only thing that is bigger in 2009 is payroll at $30.9 billion," he says

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry