Unemployment Debit Cards. Good intentions with pitfalls?

The Associated Press today released an article about some of the pitfalls of state governments's wonderful idea to implement debit card programs for recipients of state unemployment benefits. (see below):
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AP IMPACT: Jobless hit with bank fees on benefits

Associated Press - February 20, 2009 12:43 AM ET
A new analysis shows many unemployed Americans are having to pay just to collect their own unemployment benefits -- or pay to call customer service to complain about it.

A review finds that 30 states have struck debit-card benefit deals with banks that include Citigroup, Bank of America, JP Morgan Chase and US Bancorp. All the programs carry fees, and in several states the unemployed have no choice but to use the debit cards. Some banks even charge overdraft fees of up to $20.

A Democratic state lawmaker in Missouri has received a wave of complaints about the fees from autoworkers laid off from a suburban St. Louis Chrysler plant. She's urging a statewide review an eye toward reducing the fees.

With the national unemployment rate now at 7.6%, the market for bank-issued unemployment cards is booming.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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Here is another example of the banking industry's attempt to bring a solution to states in order to lower costs of distributing payments. Did they accomplish this objective? Probably yes. But do they really care about the unemployed recipient? Aren't they really after the millions of unemployment cash deposits to stash in their banks for the state? You bet!

Along with the ability to earn intesest on the deposits - at low interest rates these days, how do banks make money? Afterall, one can only assume that the low bidder with the most influence won the business. The simple answer is fees, fees and more fees as illustrated in this article.

How do they maximize fees? Oops, someone forgort to look into the notion that banks are very territorial about who uses their ATM's for free? Not my customer? Thank you for that $1.50 - $3.00 per transaction. The other way to collect fees is the oldest banking trick in the book. Give 'em free checking and the case of unemployment cards, whammo hit 'em hard with NSF and Overdraft fees.

Is there another solution? Frankly the notion of issuing payments to debit cards like the unemployment dispersement and entitlement programs described above is a good one. Moving to electronic payment methods is more efficient, cost effective and less risky for states and the recipient. But for this Blog, states must negotiate the best deal AND read the fine print to so that the people who need the money most at these challenging times, their previously employed TAXPAYERS can maximize their cash benefits.

Directo offers a bank debit card program for recipients of unemployment and entitlement benefits. It's philosophy has been to fully discloses fees which are typically a fraction of the "free or low cost" bank programs. Directo also offers low cost banking solutions (pay card, or payroll card) for workers who cannot or chose to not use a traditional bank account to receive direct deposit of pay.
BH