Savings & Investment, Smart Spending, Taxes

Managing Your Government Benefits Without a Bank Account

Many people are turning to life without a bank.  Some find the large corporations to be unscrupulous; others are trying to make their life simpler.  Regardless of their reasoning, life does tend to be more expensive without a bank.  Using a check cashing service can be a financial drain.  And life can be more dangerous; carrying around large sums of cash is not something very many people want to do.  As a low-cost alternative, the Treasury Department is allowing government benefits to be loaded onto a pre-paid Direct Express Debit Mastercard.


Millions of people receive government benefits every month.  They are seniors collecting social security, and they are disabled persons receiving SSI benefits.  While many of them have signed up for direct deposit to their bank account, many more still receive a paper check each month.  For those receiving a check who do not have a bank account, this card is designed to make their life cheaper and easier.


Much like other prepaid cards, this card is loaded each month and is widely accepted.  It claims to be safer than checks, which are subject to fraud, and faster than checks as they are subject to the mail delivery system.  Getting money off the card is as easy as getting cash back, or using an ATM.  For every deposit onto the card, the cardholder can perform one free withdrawal from any ATM (the owner of the ATM may still impose a fee).


Just like all other prepaid cards, this one too has its pitfalls.  While many of the features are free, there are still those that cost money.  Such as having a paper statement mailed to you ($.75 per month).  Or ATM withdrawals over your free allowance ($.90 per withdrawal, plus ATM owner fees).  If you lose your card you get one free replacement after that ($4 per card).  Foreign transaction fees apply to this card (3% of each transaction).  If you still have a bank account and want to transfer money into it that will be ($1.50 per transaction).  So the fees aren’t outrageous, but they can still add up, especially for those who are used to getting these services through their bank (often for free).


Living life without a bank has always been something that has baffled me.  Now that prepaid debit cards are gaining popularity, it still baffles me.  Essentially the person is getting their money loaded to a free prepaid debit card, instead of deposited to a free checking account (which comes with a debit card).  They forego conveniences like walking into the bank and talking to a teller, free ATM withdrawals from the bank’s ATM, checks available when needed (such as paying the rent), and various other services.  In short, I do not see a reason to not have a bank account.  But the consumer wants the prepaid debit card option, so the government is capitalizing on the idea.


If you are getting government benefits, and you are living without a bank, this card does appear to be one of the better deals out there.  You can get cash back with a purchase, so you can get money off the card without a fee.  There is no card sign-up fee, no loading fees, and no monthly fees.  If you truly wanted to, you could operate the card completely free of charge.


What do you think?  Would you opt to take your government benefits on a prepaid card?