February 23rd, 2009
01:41 PM ET

Are banks robbing the jobless of their unemployment benefits?

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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.

Filed under: David Gewirtz • Economy • Unemployment
soundoff (20 Responses)
  1. Dulcie - Denver

    I was unemployed for 8 months and got my unemployment on a Chase debit card. I read the flyer before I ever activated the card and avoided most of the fees.

    About the same time, Chase deployed many new ATM machines in convenient locations (like Walgreens) so I could easily withdraw almost my entire UE check and deposit the cash in my checking account with no fees.

    You just have to make sure to read the fine print early and often.

    February 24, 2009 at 8:12 am |
  2. Kenneth Tea

    The banks as do the credit card companies need more micro regulation. You cant even pay your credit card payment over the phone without paying a "proccessing" fee of $10-$15, which is really a convienence fee because it cost them nothing, you are actually paying the offset for them paying someone hourly to open mail in payments delivered from the mail room to punch numbers into a computer! If I call an automated system and punch numbers into their computer, how does that cost them money? This is just one of the ways they nickel and dime you for a proccess that is convenient for you and them!!!

    February 24, 2009 at 2:37 am |
  3. Luis

    The bank has never robbed me. Thanks because i look at my records immediately. If people took the records of their purchases and stuff, dont write bad checks, dont over draft, Dont borrow too much. These things wouldn't happen to you.

    Dont blame the banks for your problems.

    No bank nationalization you morons. Nationalize the Media, their on your side anyways, what the difference?

    February 23, 2009 at 8:56 pm |
  4. sharon from Indy

    What you failed to reveal about bank/unemployment debt card transactions:

    It cost $3.00 to talk to a human being about your debt card.

    It cost $1.50 ATM fees if one is not using a "national" bank.

    The banks would like for the owners of the unemployment cards to use an Interlink store....it suppose to have the logo on the store window. So, what if the store is not Interlink(ed)? How much are the fees?

    If the unemployment debt card balance is less than a purchased amount, the store does not get a message that the debt card doesn't have enough money, therefore, the card holder pay $20 for overdrawing. Clever enough by banks. Funny, my regular bank debit card does this with no problem.

    The best way for an unemployed worker to receive all the benefits is to go to a "national bank", ask for all the money on the debit card, and then go home and place it under the mattress. It is the only way the banks will not benefit from what is already the taxpayers money.

    February 23, 2009 at 7:40 pm |
  5. Mari, Salt Lake City

    @ James T. Grimes.......... sir, the bail out of the BANKS and WALL STREET......... happened on Bush's watch! Remember, Bush & Paulsen went on TV, and asked for the bail out of these schmucks!

    Don't blame Obama!

    February 23, 2009 at 7:28 pm |
  6. Larry L.

    The whole reason we are in this mess is that government FORCED the banks to make bad loans on houses,once the average citizen realizes and understands that, and puts the blame where it belongs on the congress,we are just going to allow government to keep screwing up our capitalistic monetary system.

    When are you going to put Congress under the same microscope you do the bankers? People like Barney Frank and Maxine Waters forced the banks to make loans to people that should not have qualified, then continued to protect the practice when everyone saw the problem coming two years ago. Now Frank, Waters and others are screaming the loudest at the banks for doing what they were forced by Congress to do. Quite honestly, I have more faith in the banks, as bad as they are, than I do this Congress

    February 23, 2009 at 6:46 pm |
  7. Floridavoter

    You are hopelessly naive, Mr. Gewirtz. The banks do this "favor" to the unemployed solely so they can lie in wait for the first slip-up, then pounce on the unfortunate card holder for fee upon fee. They have it down to a fine science and thanks to our noble defenders in Congress can enter transactions in any order they please to maximize penalties. I know, my debit card was hit up for over $500 in just three days this fall. (And for the multitudes out there who have never made a mistake, spare me the self-righteous lectures, please.)

    February 23, 2009 at 6:32 pm |
  8. Randy

    Read the fine print. If the info is there and you allow it anyway, then you deserve what you get. Stupidity is it's own reward.

    February 23, 2009 at 4:34 pm |
  9. Levon

    If intent truly is 9/10 of the law, then let us ask ourselves; what motivated the banks to contribute such acts of kindness, like supplying "free" banking services to state governments and unemployed citizens?

    February 23, 2009 at 4:02 pm |
  10. KAREN

    How can this be legal,but it is but there are atms that dont charge,people need to reed there informaction they recieve from uninployment when the get there ATM cards.

    February 23, 2009 at 3:52 pm |
  11. Charlotte D

    Besides unemployment benefits, states issue food stamp benefits, cash assistance benefits, etc. using a debit card. At first I too was outraged that high fees were "robbing" people of their UI benefits, but then you find out that there are ways to save on or avoid the fees. This is just like using your ATM card at banks other than your home bank, and then complaining about your ATM fees. Take out more than $20 and get cash before you leave town. Can't have cash in your wallet w/o spending it? That is your problem.

    And for those who do not have a checking or bank account who get a check rather than a debit card, there are those nasty fees that check cashing companies charge. And let's talk about the income tax preparers who say, want to get your refund today and not wait? You can have your refund for the small fee of a double digit interest rate.

    So as you say, educating yourself about your options is key. There is always someone in the wings waiting to separate you from your money. Charging interest makes the world go 'round. (I hate paying interest by the way.)

    February 23, 2009 at 3:23 pm |
  12. Ken

    At least we all seem to agree, we can not trust banks! Once the mainstay of trust, now those that we know are not to be trusted. They have a lot of proving to do
    Ken, Phoenix

    February 23, 2009 at 3:22 pm |
  13. kaz

    Thats the least of our problems. We have lost 50% of our 401k and trust me I didn't have that much but losing half and my house going down 20% i am screwed.

    February 23, 2009 at 3:10 pm |
  14. Margo in TX

    I was on unemployment for about 4 weeks in June of 08, The State of Texas decided to go to the Debit Card system sometime in 06 or 07. It was clearly defined what the fees were, the first time I went to the bank to withdraw the money and deposit in my own bank the teller was very helpful and gave me a run down of these fees. If I didn't speak English they would have provided a teller to help also. The bank that services the unemployement debit card was very helpful and informative. I believe that most of the services (ie: child support etch) are now paid through either direct deposit or debit cards so there is no chance of paper checks being stolen.

    I know I hate bank fees and their utter lack of concern for their customers but my experience with this situation was a posititve. If someone is on unemployment they should be aware of how much they are receiving in benefits and how much they have to spend. Then there will be no fees.

    February 23, 2009 at 3:02 pm |
  15. Annie Kate

    My brother got his unemployment with a debit card; and he read the fine print, and the rules and all the ways to get at your money without paying any fees and he had it down to a fine art. Then he taught all his buddies the same thing so they all got their money with no fees attached. They thought it was the coolest thing in the world. There was only one that kept saying...."there has to be a trick in here somewhere; the bank always gets you in the end". I think he's still waiting!!

    February 23, 2009 at 3:00 pm |
  16. Joe G. (From Illinois)

    Why not just become Hard Core Communist and morally nondiscriminatory in every sense? Oh.. That’s right! Where would Americans find a president and an attorney general that would want to push that kind of agenda?

    February 23, 2009 at 2:56 pm |
  17. Melissa

    lol. Honey, the whole reason we're in this mess is that the banks got greedy. Housing prices sored far above what the houses are actually worth, and the amount they're charging people for interest is insanely high.

    I'm sorry, I'm not going to pussyfoot around this. The banks did it. Yes, they are robbing people. Whether they're robbing for unemployment (which I don't doubt that they are since they're thieves anyway) isn't really the point. They're robbing people and have been getting away with it for decades because the gvt has been lax on them.

    Enough is enough.

    February 23, 2009 at 2:52 pm |
  18. Bill

    Another excellent question is, Are online, for-profit universities robbing minorities and taxpayers, too?

    February 23, 2009 at 2:51 pm |
  19. Gene Penszynski from Vermont

    Are banks robbing the jobless of their unemployment benefits?

    What not ? They've already robbed us of our jobs, savings, mortgages, car loans why make a clean sweep of it and get the unemployment benefits as well !

    February 23, 2009 at 2:02 pm |
  20. Michael "C" Lorton, Virginia

    Mr. Gewitrz: If you don't know by now their is no honor or morals among theives-–banks included.

    February 23, 2009 at 1:46 pm |