Controversy over government debit cards

March 12, 2008 3:45:56 PM PDT
A growing number of government agencies are issuing debit cards to consumers for certain benefits, sparking controversy.

Some consumer advocates claim debit cards come with hidden fees and hidden dangers.

The government says the debit cards are more secure and more convenient than the old payment method. But some consumers worry the cards will prove to be the very opposite.

Ken Cooper works at a plant nursery, which closes down during the winter.

So, two months of the year, he collects Pennsylvania unemployment benefits.

"Yeah, this is the letter I first got," said Ken Cooper.

In lieu of paper checks, Pennsylvania is now issuing Mastercard debit cards. They're administered for the state free of charge by Comerica Bank.

"I just really don't like that idea of that third party in there," said Cooper.

Ken doesn't want a private company involved in his personal business with access to his personal information.

But, like it or not, this is a trend. Pennsylvania is also providing child support benefits and some workers compensation benefits and some workers compensation benefits on debit cards too.

"Suddenly you've changed the whole dynamic of this - and now there is an incentive for people to profit off of social security," said James Browning with Penn Pirg.

Consumer advocates warn if you aren't careful, you could spend a lot of money on fees.

With the state debit card, some ATM withdrawls cost up to $1.50 and balance inquires 40 cents.

"And that's going to mean in the long run bigger profits for banks and less benefits for people," added Browning.

But Pennsylvania's Department of Labor and Industry says fees are clearly disclosed. And, there is no fee to make a purchase from a merchant who accepts Mastercard. Cash withdrawls at a teller window at any banks that accepts Mastercard debit cards are also free.

"We're doing this primarily as a way of making those benefits as secure and convenient as possible to consumers and at the same time saving tax money," said Shannon Powers with the Pennsylvania Department of Labor and Industry.

PA Unemployment Benefit info.:

PA Debit Card info.: Pennsylvania CareerLink info. for jobseekers, employers or providers of training and job-related services:

Social Security: