JPMorgan Chase & Co. won a contract to provide reloadable prepaid cards to Rhode Island to replace unemployment checks.
Rhode Island is only the eighth state to move from paper checks to cards for unemployment benefits. JPMorgan Chase, which also has contracts with New York, Arizona, and Louisiana, handles half of them.
Laura Hart, a spokeswoman for Rhode Island's Department of Labor and Training, said that by moving to a card-based format, "we're saving about a half a million dollars in administrative processing and mailing fees" a year.
"When you have a check, you have to mail it every week, whereas a debit card gets mailed once, and the money gets automatically deposited," she said. "So we're losing a step, and we're losing paperwork, and we're saving trees."
Rhode Island launched a test of the cards Wednesday and plans to roll them out statewide by the end of March or early April, Ms. Hart said.
The state also offers unemployment benefits through direct deposit.
In moving from checks to cards, unemployment benefits have lagged some other government benefits, such as food stamps and the Temporary Assistance for Needy Families program.
Beth Hosen, JPMorgan Chase's public sector sales manager for the Northeast, said in an interview that states tend to be "cautious" when changing to cards. "It's a challenge. They have a whole paper infrastructure now."
Numerous states are looking into switching their paper-based systems to cards, Ms. Hosen said. The federal government, which funds most unemployment benefits, also may be creating an incentive to switch to cards, because it is considering lowering its subsidies for postage, she said.
JPMorgan Chase has provided various types of government benefit cards for several years, Ms. Hosen said, but the business got a major boost in 2005, when the New York company handled the Federal Emergency Management Agency's emergency relief cards for Hurricane Katrina victims.
Louisiana also uses JPMorgan Chase's unemployment benefit cards, whose use picked up dramatically after the hurricane hit. Many Louisiana residents who received unemployment benefits were no longer living in their homes, but "they were able to receive their payments via cards, so they were able to access their benefits, regardless of where they moved to," Ms. Hosen said. "It definitely had the portability that receiving a check doesn't have, especially since there was no mail for weeks."
In addition, many unemployment beneficiaries who were receiving money through direct deposit switched to cards, she said, particularly if their local bank "wasn't available" after the storm.
As with many government benefit program, Rhode Island's contract specifies that recipients should get access to their funds without paying automated teller machine surcharges. Recipients can make surcharge-free withdrawals at any ATMs belonging to JPMorgan Chase or Washington Trust Co. of Westerly, R.I.
Additionally, JPMorgan Chase has a deal with the Allpoint surcharge free network to let recipients to use the network's merchant ATMs to avoid surcharges.
Robert A. Bucceri, a consultant with Chaddsford Planning Associates in West Chester, Pa., who works with the Electronic Funds Transfer Association, said that state unemployment programs have not moved to cards as quickly as others because many of the programs moved to direct deposit years ago.
"The need to issue cards has not been as great, because they have already set up a nonpaper mechanism in direct deposit," Mr. Bucceri said.
