Federal benefits go to direct deposit March 1

 Federal benefits are going electronic on March 1. Anyone who receives federal benefit payments – Social Security, Veterans Affairs, Supplemental Security Income (SSI), Railroad Retirement Board, Department of Labor (Black Lung) and Office of Personnel Management  – is required to switch to an electronic payment option by then.

Prepaid debit cards can be used instead of direct deposit to receive federal benefits.

“We’ve been pressing it since the beginning of the year,” said Katie McDowell, manager of the Hodgenville branch of the Fort Knox Federal Credit Union. “There aren’t too many of our members who still get the paper checks, but for those who do, we’ve been encouraging them to make the switch.”

The U.S. Department of the Treasury is moving to all-electronic benefit payments, which deposit payments electronically – no more paper checks. It’s estimated the move will save taxpayers $120 million a year, and is promoted as being safer and more reliable than checks delivered through the mail.

Hodgenville Postmaster James Senig said very few federal benefit checks pass through the local post office.

“We only get a handful,” he said. “Most people have already gone to direct deposit.”

Those who do not enroll in direct deposit or for anyone who does not have a checking or savings account may receive a Direct Express Debit MasterCard – a prepaid debit card.

The card can be used to make purchases and to pay bills online or by phone if the merchant accepts Debit MasterCard. Those using the card can also get cash back at the register at most stores when making a purchase with the card. People using the card will get one free ATM cash withdrawal for each deposit posted to the account each month, provided they use one of the network ATMs.

Tiffany Perry, executive vice president at Lincoln National Bank, said the ATM charges could end up being an unexpected expense.

“Regardless of what ATM they go to, they’ll be charged a fee (after the one withdrawal),” she said. And it may not just be a fee charged by the card issuer: banks not in the card network also will impose a fee. “It would be more economical for them if they open an account.”

McDowell added: “There could be glitches with the card.”

Perry said she and her staff are seeing more people making the switch to direct deposit as the March 1 deadline nears. “Most of our customers had it set up already, but we are seeing some more now making the switch.”

She said having a relationship with a financial institution offers safety and security.

“If you lose it, what happens?” Perry said of the debit cards. “If someone accesses it illegally – what happens? I don’t know if you’ll have the security. Is their money protected? Insured? If you’re at a bank, you’re protected.”

In rare cases the Treasury Department will grant exceptions to the direct deposit rule. 
Automatic waivers are granted to people born on or before May 1, 1921. Check recipients living in remote areas without sufficient banking options, as well as check recipients for whom electronic payments would impose a hardship due to a mental impairment may apply for a waiver.

Both Perry and McDowell said having an account at a local financial agency has its advantages.

“You get more one-on-one contact with your local financial institution,” McDowell said. “They’ll know you.”