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How Banks Take A Big Bite Out Of Government Benefits


How Banks Take A Big Bite Out Of Government Benefits


Consumers witnessed a victory this week when Bank of America backed off its threat to institute a $5 fee for using a debit card, following a public outcry that led most of the other big banks to foreswear similar moves. But not everyone has been spared debit card fees. As Janell Ross pointed out at The Huffington Post yesterday, banks are making nice profits from doling out government benefits through prepaid debit cards.

It’s obvious that in a sour economy like ours, usage of programs like unemployment benefits, food stamps, and cash assistance will skyrocket. It used to be that most of these programs distributed actual money to beneficiaries. Food stamps were quite literally stamps. These days, however, things have been ‘modernized’ so that many benefits come through prepaid debit cards administered by banks like JP Morgan, Bank of America, and other behemoths.

So what’s the problem? Doesn’t this just make it more convenient for users? Isn’t plastic easier than cash?

The first problem is that users, who are clearly already strapped for cash if they’re turning to government benefits, are finding themselves hit with fees for using the cards. As an example, Ross points to one analysis that California families will pay over $16 million in surcharges to access benefits this year. While there has been a lot of action around limiting swipe fees and much outrage at charging customers to use regular debit cards, prepaid debit cards are a whole other animal. Even consumers using them to access their privately earned money may be charged for buying the cards, swiping the cards, and withdrawing money. And people getting benefits through them aren’t any exception: They face charges for withdrawing money too many times, using an out-of-network ATM, drawing more money than is in the account, leaving the card inactive for a certain period of time, and some even charge per purchase.


  1. Silina November 3, 2011

    This is the height of chutzpah. How dare banks make a profit from perople in need of government assistance? When a debit card is used to access money needed through govenment assistance, the funds accessed are not only those persons’ funds but tax payer funds. I, for one, do not want my tax dollars going to make large banks even larger. When government funds are funneled into these banks via debit cards, the banks are making obscene profits from another person’s misery. This was NOT what was intended our tax payer dollars to do.
    These banks received government bailouts from the previous administration because supposedly these banks were “too big to fail.” In the future, any bank that is “too big to fail” it should be considered to be “TOO BIG TO EXIST” and that bank should be broken up into several smaller banks. Roosevelt did just this in the 30s and it should be done again.

  2. LindaTift November 3, 2011

    This is another case of how our government is bought and paid for by big corporations. This must be stopped. As more and more states are cutting benifits to those in need, we find that they are making big corporations richer.

  3. lostinredstate November 3, 2011

    How about the 25-30 hour/week minimum wage earner who takes his BOA paycheck to BOA to cash it? They take $5 from the paltry check because he doesn’t have an account there. (Like BOA needs that $5.) The check, drawn on that very bank, states who it is payable to and for what amount of money out of the account holders account. Nowhere does it say — oh and whatever BOA wants to take out for themselves. It’s a paycheck to someone who doesn’t make enough to even need a checking account — make one mistake and how would they ever pay all of the hefty bank charges?

    The rich in America have gotten that way on the backs of the poor and they will continue to do it any and every way we continue to let them get away with it.

    My question is: How rich is enough?? How big does someone’s house have to be? Or even, how many houses does one need??

    Americans ought to be ashamed. Especially in light of all of the talk about “In God We Trust.” Doesn’t take a genius to figure out who “We” is.


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