David Gewirtz | BIO
Editor-in-Chief, ZATZ Publishing
I hate it when the facts get in the way of a good rant. I'd like to go on a rant about how the banks are screwing the unemployed, how the jobless are paying bank fees just to get access to their money, and how the banks are robbing the unemployed.
I'd like to, but I can't. The facts are getting in the way.
A few years ago, some states figured out that the practice of printing and mailing unemployment checks cost them hundreds of millions of dollars each year. They couldn't cut down on the amount they were paying the jobless, but perhaps these state agencies could find a way to cut costs on the processing. And find a way they did: bank debit cards.
Many states now direct-deposit unemployment insurance payments into bank accounts linked to debit cards, which are then provided to unemployed citizens. This costs the states nothing - the banks pick up all the expenses.
If you're eligible for unemployment benefits in most states, you now get a debit card, which you can use like a typical VISA debit card. When you shop or dine, present the card and it works just like a credit card, reducing your balance but buying you goods and services. You can also withdraw the full payment and deposit it into your regular bank account.
But if you make a cash withdrawal more than once, or if you charge more than you have in the account, or if you call the bank for help, you're likely to get nickled and dimed with fees ranging from a buck to five bucks per transaction.
This, of course, is why banks are providing the service free to states. They're making it up on bank fees. Once again, the banks are perpetrating another outrage against the downtrodden - or are they?
Oh, man. Nothing sucks more than having to defend the honor of banks, especially when last week I suggested When it comes to bankers, I so miss hanging.
Just how heinous are the banks?
It turns out this isn't as clear cut as we might like. There are three elements to the issue: costs, education, and doing your homework.
The banks are saving the states money by providing debit cards to the unemployed, but they aren't subsidized by the states. And it comes at a cost. Contributing to their expenses: they have to buy and print those little plastic cards, pay their own data processing people, track all the deposits and withdrawals, mail the cards to the unemployed, pay customer service people and tellers, pay employee health insurance, buy and maintain ATMs, and even buy or rent the land where ATMs and bank branches are located.
All told, you're still talking about hundreds of millions of dollars per state, and given that banks (for now) are commercial enterprises, they have to make a profit (or at least break even). Banks do that through bank fees charged to the hapless unemployed.
Educating the jobless
And that brings our discussion to education. I spent an afternoon reading the brochures and documents provided to unemployed citizens in a number of states. Yep, fun times. Fun times.
Most of the documents follow the same format, but I'll use the flyer (download PDF) from the Texas Workforce Commission as an example. This is a typical three-fold flyer that comes with the VISA debit card operated by Chase. On the cover flap, it trumpets, "The safe and easy way to receive Unemployment Insurance benefit payments."
Inside, it says, "Now there is a better way to get your Unemployment Insurance (UI) benefit payments...If you qualify for UI benefits, you will have the safety and convenience of a Visa debit card with the customer support services of Chase Bank."
And that's where they get you. If you're jobless and you treat this card like a regular debit card, making lots of small cash withdrawals as you need the money, or treating it like a VISA card and charging more than you have in the account, you're going to get slammed with fees.
But I read the brochures and I read the FAQs (download PDF) and they are quite clear on both how to get money out for free and what services will cost extra. In fact, it looks like the brochure writers genuinely went out of their way to communicate ways to avoid fees.
Doing your homework
And that brings us to the "doing your homework" part of our discussion. Most consumers don't do their homework. They can't be bothered to read the manual and they don't have time to become experts.
The same appears to be the problem with the unemployment insurance debit cards. And this is why the banks aren't at fault.
You see, it is absolutely possible for an unemployed person to get all of his or her money from the debit card without any fees. In fact, there are three or four different ways to do so, from a single withdrawal at a teller, to using ATMs, to cash back on retail purchases, to actually making purchases using the card.
If there was no way to get your money without fee, we could burn the banks at the stake. But as you can see, that's not true. Instead, unemployed card holders are using the extra services provided by those cards and are incurring fees for those services. They don't have to use them. They just do.
Of course, banks know this and are banking on those fees to offset costs and maybe make some money. But does that make them evil (in this one, very isolated instance)? The banks know the behavior patterns of large groups of customers and are taking advantage of those behavior patterns to make a profit.
Here's what's really interesting. If the card holders actually paid attention to the many ways to get money out for free, this program would actually be one of the few win-win-win programs ever perpetrated by a state government or a bank. The states save millions and the jobless get more ways to gain access to their money.
My take on it is this. If you had no choice, if there was no way to get your money without usurious fees, there'd be reason for yet more outrage. But since you have a bunch of ways to get your money at no cost, it's actually a relatively fair program.
We live in an increasingly complex world that requires more and more understanding on the part of each, individual citizen. Whether it's using your unemployment card, surfing the Internet, signing bad mortgages, or taking your prescriptions, each American citizen needs to take the time to learn the ins and outs of what he or she is doing.
In the end, you are your only real protection.
One final note
I mentioned this a few weeks ago. According to a 2003 study done by the U.S. Department of Education's National Center for Education Statistics, 27 percent of Americans over the age of 65 and 12 percent of all adult Americans have a "below basic" level of document literacy. Also, many older Americans can't see well enough to read.
If states are providing instructions on debit card use through brochures and other items requiring reading, a big chunk of our population won't be able to learn what they need to know.
That's a bigger problem than just debit cards, but if we can't improve the nation's literacy rate, more people will find themselves in trouble for more things they couldn't read up on.
Editor’s note: David Gewirtz is Editor-in-Chief, ZATZ Magazines, including OutlookPower Magazine. He is a leading Presidential scholar specializing in White House email. He is a member of FBI InfraGard, the Cyberterrorism Advisor for the International Association for Counterterrorism & Security Professionals, a columnist for The Journal of Counterterrorism and Homeland Security, and has been a guest commentator for the Nieman Watchdog of the Nieman Foundation for Journalism at Harvard University. He is a faculty member at the University of California, Berkeley extension, a recipient of the Sigma Xi Research Award in Engineering and was a candidate for the 2008 Pulitzer Prize in Letters.