DETROIT -- Beginning this spring, a prepaid debit card for Social Security benefits will be introduced in Texas, Oklahoma, Arkansas and Louisiana.
Later in 2008, the prepaid card - which is designed to help the Treasury Department cut down on the costs of mailing paper checks - would be rolled out nationwide.
"The real value to the cardholder is access to things you can't get with cash," said Nora Arpin, director of government electronic solutions in Detroit for card administrator Comerica Bank, one of about a dozen financial institutions to compete for the business to issue the cards.
For some consumers, plastic could be better than paper.
No watching the mailbox and waiting for the Social Security or Supplemental Security Income check. No paying a check-cashing service $5 or even $25 to cash the check. No walking around with lots of cash. No lost checks.
In Michigan, checks are issued for about 17 percent of the total payments for Social Security and Supplemental Security Income recipients. In Kentucky and West Virginia, the percentage of payments issued by check is more than 30 percent.
The rest of the people receive their monthly benefits via direct deposit to a bank or credit union account.
Some who use paper checks have bank accounts but don't like direct deposit.
But about 4 million people nationwide who receive Social Security checks and checks for Supplemental Security Income do not have bank accounts.
"Our primary audience for the debit card is the un-banked," said Alvina McHale, public affairs director for the Treasury's Financial Management Services.
McHale said the Treasury could save $44 million a year if all of those who receive benefits but don't have bank accounts signed up.
Those who sign up for the prepaid debit card for Social Security benefits will see their payments automatically loaded onto the card each month. The card could then be used online to buy items, at the grocery store or other stores or to get money through ATMs.
The first withdrawal at an ATM would be free. After that, withdrawals at an ATM would be 90 cents. Users could face extra ATM surcharges.
If someone with the card wanted to use Comerica's optional online bill payment service, there would be a charge of 50 cents for each online payment. However, consumers aren't required to use the Comerica service; they can go directly to their utility or whomever and set up their own online payments. They would pay whatever fees those organizations charge.
Or a recipient could get the entire cash amount withdrawn at a bank teller. But, Arpin said, the idea is to offer a more secure solution instead of carrying around large amounts of cash.
McHale said the card would be safer than carrying cash and could prevent forged checks. The consumer would have a personal identification number and the money would be accessed only if you knew the PIN. About 58,000 Social Security paper checks were forged last year.
"We don't think people will regret it," she said.