For people on unemployment, bank fees are a real killer

EBT cards

EBT cards for unemployment benefits are often bank-administered and true to form, people on benefits are getting dinged with unemployment bank fees. Photo Credit: US Dept of Agriculture/Wikimedia Commons/CC-BY

A recent National Consumer Law Center report found people receiving unemployment benefits are getting nickle and dimed to death by banks. Unemployment bank fees are about as counterproductive as it gets and it’s partially thanks to a sweetheart deal between them and the government.

Unemployment bank fees chipping away at already meager subsistence

The point of unemployment benefits is for people whose lost their job and are eligible for such benefits can keep a roof over a head and some food in the fridge while they look for work.

People who receive such benefits don’t living on much and what little they do receive, as it turns out, is being chipped away at by large retail banks, according to Daily Finance, a group of businesses that frankly don’t need any help at this point. Banks are assessing fees on unemployment benefits thanks to some sweetheart deals struck over a decade ago.

The National Consumer Law Center is compiling a report on the subject. The Associated Press got their mitts on an early version. How much in unemployment bank fees is being paid isn’t known, but rest assured it’s a lot of money.

EBT cards bank-run, profitable

Around 2000, the federal government, which funds much of unemployment benefits though states pitch into the pot, decided benefits should switch to non-paper sources as soon as possible. Food stamps became EBT cards – despite dummies still calling them “food stamps” – and things like tax refunds, Social Security, disability and other benefits could be sent as a paper check, wired via direct deposit, or issued through a prepaid debit card.

Banks administer the prepaid cards and assess fees on use. Balance inquiries, making a purchase using a PIN, calling customer service or not using benefits for a period of time. Unemployment bank fees are obviously not assessed if a person with a bank account opts for direct deposits but not every state makes it easy to do. Banks administering the accounts, such as JPMorgan Chase, Bank of America and Bancorp are rolling in the dough as a result.

State of confusion

According to the Washington Post, Arizona automatically enrolls a person on unemployment in an EBT card program; switching to direct deposit requires physically completing and mailing a form. It can’t be done over the phone or online. California, Indiana, Kansas, Maryland and Nevada don’t allow direct deposit at all.

Direct deposit usage varies. Minnesota makes it easier to use direct deposit, asking upfront according to CBS, how people prefer to receive unemployment benefits. As a result, Minnesotans, even if many are fans of those awful, terrible, lackluster, talentless hacks the Vikings instead of a noble and awesome football team like Green Bay, have an 82 percent rate of using direct deposit. Only 16 percent of Arizonans do so. The NCLC previously reported on this phenomenon in 2009, finding that 18 states had made improvements. Three were ranked “bad” and 21 were “neutral.”

The only clue as to how much money is being lost is that Pennsylvania switched to an EBT card from JPMorgan Chase that carried fewer fees, saving $5.2 million per year. That can add up substantially across all 50.


Daily Finance

Washington Post


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