South Carolina's unemployed soon will have to sign up for direct deposit or accept a Bank of America debit card to receive their weekly payments.
The S.C. Employment Security Commission will quit mailing checks within the next few months to save money on postage, said Jimmy Jones, the agency's assistant director for unemployment insurance.
The debit cards have been criticized in other states for charging extra fees to people who already are suffering financially.
South Carolina's employment commission chose the electronic payment system after the federal government quit paying for the postage to mail checks, Jones said. The new system could be in place as early as May, he said.
The commission spends about 50 cents to print and mail each check. Last week, it made 121,000 payments, Jones said.
At that rate, it would cost the agency more than $3 million a year to issue paper checks.
Bank of America will charge the commission 3 cents each time money is deposited into a person's account. That system would cost $188,760 per year.
Bank of America will make most of its money off the transaction fees it charges merchants each time one of the cards is scanned, Jones said.
The employment commission chose Bank of America from several bidders because it has a large presence in South Carolina and already does business with the agency, Jones said.
Thirty states have struck such deals with banks that include Citigroup, Bank of America, JPMorgan Chase and US Bancorp, an Associated Press review of the agreements found.
Ten more states are considering such programs or have signed contracts. The remainder still use traditional checks or direct deposit.
All the debit-card programs carry fees, and in several states the unemployed have no choice but to use them. Some banks even charge overdraft fees of up to $20 even though they could decline charges for more than what's on the card.
"It's a racket. It's a scam," said Rachel Davis, a 38-year-old dental technician from St. Louis who was laid off in October. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.
In South Carolina, there will be fees associated with the Bank of America debit card, Jones said.
"We're going to make it as clear as possible that there are fees associated with it," he said.
Debit card users in the state will be allowed one free withdrawal per week from a Bank of America ATM. And store purchases with the card will not carry a service charge.
However, customers could be charged $1.50 to talk to a bank representative.
"You don't want to call and talk to them unless you have a serious problem," Jones said.
The debit card can be avoided by those who choose to have the money directly deposited into bank accounts.
"Personally, that's what I would do," Jones said.
The check is not in the mail
The S.C. Employment Security Commission has contracted with Bank of America to provide debit cards to those who receive unemployment checks. People also have the option to accept direct deposit. The program could begin as early as May. Some fees associated with the card:
• ATM withdrawals: One free per week at Bank of America machines; all others $1.50 each
• Store purchases: No fee with merchants who accept Visa
• Customer service inquiries: Free online and automated telephone inquiries; one free live inquiry per month; $1.50 for each additional call
• Emergency cash transfers: $15 in the U.S.; $30 internationally
• Card replacements: One free per year; $2 for additional; $15 for express delivery
-- The (Columbia) State