Feb 20, 2013 Sean Albert
The United States Department of the Treasury has kept its word to install electronic payment-only policies for Americans on Social Security and veterans' benefits this March. Citizens relying on federal benefits who have yet to switch to the electronic payment program may find themselves at a disadvantage on March 1, as many receiving these funds are not familiar with new technology or are simply too poor to afford the costs associated with opening a bank account. While the federal government is offering assistance in the transition, the concerns of those in certain demographics are cropping up in the weeks preceding the March 1 deadline.
Later generations may have an issue
The financial benefits will be issued to those who receive them through either direct deposit to personal bank accounts or on a Direct Express card, a government-issued prepaid card users can apply for and use like a debit or ACH card. As simple as the system may seem to younger generations, some senior citizens receiving Social Security or veterans' benefits are not happy about the switch from a paper check in the mail.
In an interview with ABC News, Glenn Smallwood, a 63-year-old on Social Security in Clearwater, Florida, says his stance on handling money - that is, not in a bank or through electronic transactions - may seem comical to younger people, but he has no good feelings about the new benefits policies.
"I'm set in my ways," he claims. "I don't want my money in a bank. I keep my money in my pocket. I don't think the federal government has the right to tell me that I have to have a checking account or a debit card."
The new regulations may be of interest to alternative credit data businesses, as spending through prepaid cards and a fresh crop of bank accounts among people who previously lived without one will provide new information to the industry. The Federal Deposit Insurance Corporation (FDIC) says their studies revealed that there were 10 million families and single homeowners living without an open bank account in 2011.
Low-income citizens could also have problems
For consumers who do not have easy access to a bank account or knowledge of credit card use, though, the results may be require additional federal cleanup in coming months.
New Mexican beneficiaries are particularly at risk for difficulties stemming from the new payment plan, according to The Santa Fe New Mexican. The source states citizens receiving federal benefits in New Mexico are currently doing so by mailed check at two times the rate of the rest of their fellow U.S. citizens.
Resident-turned-activist Mary Ann Leberg tells The New Mexican she is concerned for her neighbors who will be affected by the change because many of them, she has discovered in the past few weeks, have no idea of the policies that will be in effect at the start of next month.
Leberg informs the source that a majority of people receiving social security benefits in her area do not have the means to work with a bank and may be jarred financially when unable to simply cash a check.
"These people are very poor, and they don't have a bank account. They pay their expenses with postal money orders," she says.
One additional option individuals do have in receiving benefits is by opening an electronic transfer account (ETA). ETAs are federally insured accounts, and they are low in cost, which make them good options for those who can't afford a traditional bank account but would prefer not to receive benefits through a prepaid card.
Consumer credit data professionals and social security beneficiaries seeking more information can visit the U.S. Social Security Administration's website for more literature regarding this new alternative credit payment system.