Government Goes Digital: Social Security Checks to Stop

Our financial system is increasingly digital, with most of our money in ones and zeros than in some more tangible form. There aren’t many checks floating around anymore, and the US government has been getting in on the act.

You have been able to decide to receive your tax refund, Social Security benefits, and other federal benefits via direct deposit for years now. The government even recently rolled out prepaid debit cards for tax refunds, providing that option to recipients who want their benefits in an easy to use form, but who don’t have bank accounts.

Even with these options, though, the government has still issued paper checks to those who want them. That is changing in March.

Ending Paper Checks from the Government

Starting in May 2011, the government began requiring new recipients of Social Security and other federal benefits to accept direct deposit, or receive a prepaid debit card that allowed direct deposit of future benefits. Those who were already receiving benefits could choose to keep receiving checks.

On March 1, 2013, though, the US Treasury is hoping that everyone receiving Social Security benefits, SSI disability benefits, Veterans Affairs benefits, and government pension plan payments will switch to the new system. Efforts to encourage signups have been underway recently.

If you are receiving these federal benefits, you can go online to sign up for electronic payments. If you don’t have a bank account that can receive the direct deposit, or if you don’t sign up for your direct deposit, you can ask to be sent a prepaid debit card. Your benefits will be regularly deposited on that card. The US Treasury says that people who don’t choose the direct deposit option (either with their own bank account or with a prepaid debt card) can still receive paper checks. However, the Treasury will try to boost efforts to get those receiving social security checks to signup for the electronic payments.

Should You Get the Prepaid Debit Card?

It might be tempting to just get the debit card. After all, plastic is quite convenient, and you will be able to just swipe the card as long as it has funds. Unfortunately, the prepaid debit card may not be the best option. The card comes with a number of fees. You have to remember that it is still a prepaid debit card, and that means fees. The government’s version of the prepaid debit card is about average in terms of fees.

As a result of the prepaid debit card fees, you might be better off opening a bank account and signing up for the direct deposit. If you go the prepaid debit card route, you will lose some of your benefits money to fees. This is the case if you decide to take the prepaid debit card for your tax refund as well.

Choosing direct deposit is probably the most efficient choice. It’s free, and you don’t have to go through the extra step of depositing a check. It doesn’t take long to sign up for direct deposit, and it can save you a lot of bother.

Written by Tom

Tom Drake writes for Stupid Cents and Canadian Finance Blog. Whenever he's not working on his online endeavors, he's either doing his "real job" as a financial analyst or spending time with his wife and two boys.

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