The Tennessee Department of Labor and Workforce Development has begun offering the state’s unemployed workers the option to receive unemployment benefits either through an account tied to a Visa-branded prepaid debit card or through direct deposit to a traditional bank account.
The department offers the two options to new unemployed workers when they apply for benefits. Recipients already claiming benefits also may enroll to receive funds electronically through the department’s website.
Like many states, Tennessee is switching to electronic benefits payments to cut costs. The state expects to save some $3.2 million per year in postage and paper costs. Last year, the department distributed about 8 million unemployment checks, according to a press release.
The department last month piloted the card with 1,500 unemployed workers in the Memphis area. “The [test] went smoothly, and claimants immediately recognized the cards as a convenient option, especially with potential mail deliveries during the holidays,” James Neeley, department commissioner, said in the release.
Tennessee launched the program statewide Jan. 18. As of Jan. 20, 4,400 recipients chose the prepaid card and 4,600 opted for direct deposit. The state’s January unemployment rate is 9.4%, according to the department’s website.
The department plans to phase out checks later this year, according to spokesperson Jeff Hentschel. “We’ve had a lot of problems with issuing checks,” he adds.
Some of those problems include fraud and postal-service delays. Last year, a major flood in Nashville damaged a check-issuing facility, Hentschel says.
The department’s staffing issues also have created a problem. “If someone doesn’t get their check on time, they call us, and sometimes we’re not properly staffed to handle those calls,” Hentschel says.
The card has no monthly maintenance fee. Users may withdraw cash for free at MoneyPass or JPMorgan Chase and Co. ATMs. Chase issues the cards. ATM withdrawals outside the surcharge-free network cost $1 for the first two transactions and 60 cents for each additional withdrawal. The fee for a balance inquiry is 40 cents. Signature-debit transactions are free; PIN-debit purchases cost 25 cents.
The department spokesperson could not immediately say who processes the transactions or which PIN-debit brands appear on the card.
Cardholders also may withdraw funds for free at any financial institution that issues Visa-branded debit cards, according to Hentschel and the department’s website.
The department had some initial concerns about fees, especially after reading about problems in other states. “We’ve positioned the card in such a way that you can avoid fees,” Hentschel says.
The obstacle Tennessee and other states face with unemployment prepaid cards is consumer adoption, contends Ben Jackson, a senior analyst in the prepaid advisory service at Mercator Advisory Group in Maynard, Mass. “The question becomes, is the [card] a better deal in terms of what they can get otherwise” with direct deposit or a check? he says.
The $1 fee for ATM withdrawals outside the network is still less expensive than typical check cashing establishments, which base their charges on the check amount.
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