Thu 19 Feb 2009
State Unemployment Benefits And Debit Card Scam
Posted by RichSlick under Evil Profits
[6] Comments
I finally received my unemployment money in a form I didn’t expect. For some reason, I assumed I would be getting a check that I would take to the bank and deposit but instead I got a Visa debit card. It was a bit bewildering but after I thought about it for a few minutes I began to understand the scam.
First, by issuing a debit card instead of a check, the partner bank gets to keep/hold on to your money until you spend it. Most people won’t bother going to an ATM and pulling their money out if they can spend it off the card. Besides, there is an ATM fee for withdrawing money. You’d think the State would waive the fee or force the partner bank to waive the fee but the disclosure packet clearly states that ATM’s charge fees which are deducted from your account.
Second, if a person chooses to use the debit card or pulling the money out via the ATM, there will always be some type of residual money left on the card. For example, let’s say there is $400 on the card and you go to an ATM to withdraw the money. The ATM charges a fee of $2.50 to withdraw funds and only dispenses money with $5 as the smallest denomination so how much can you withdraw? $400 – $2.50 (ATM fee) = $397.50. Since you can only withdraw in round lots of $5, the most you can withdraw is $395.00 leaving $2.50 on the card.
The question arises, how can you withdraw $2.50 from the card? I told my brother about the “scam” and he said he would take the card to the gas station and put $2.50 of gas but I’m not sure if this works since the gas station typically pre-charges or pre-authorizes a certain amount.
So the State has the scam worked out fairly well. If there are 100,000 people on unemployment and there is on average a residual $2.50 amount left on cards that’s $250,000 of money left available to the state or the bank in residual cash left over. I’m not sure if ALL states do it this way but if it were the case and we have 4 million people unemployed then this would translate into $10 million dollars across all states in additional left over residual cash.
My plan after I activate the card is to go over to my bank and find out if I can withdraw a specific amount without incurring a fee, I might give the card to the teller and ask him/her to “charge” the full amount that should be in the card and transfer the cash to my account. What a world, what a scam…..
February 19th, 2009 at 9:14 am
That’s surprising. I collected about 4 weeks of unemployment here in VA last summer in between jobs and the state used direct deposit. Seems to me that it would save the state money that way.
The only reasons for the debit card that I could see are they want you to spend the money and not save it (ie stimulating the economy) or they are getting a nice kickback from the issuing bank.
February 19th, 2009 at 5:05 pm
I find it hard to believe that the state or the bank are in the business of “scamming” you. I suspect it is more related to the antiquated unemployment processing system than anything else.
Here in California I get a bi-monthly check in the mail… even though I would prefer to get a direct deposit. Direct deposit isn’t offered and I’ve been told “there is no money” to make it available.
It is ironic because for the state, and the banks, it is far cheaper to process the electronic blip than it is to cut a physical check… yet, we still get checks.
I am guessing that, for your state, the project costs of moving off a physical check and onto the debit card were borne by the debit card processor and they are recouping their expenses through the methods you articulate. (and yes, this can be lucrative for them to do this… but I don’t think their motives are as sinister as you portray).
Now that your state is on an electronic payment process system, you should ask your state representative why they can’t offer direct deposit for those that want it. They may be concerned about the administrative costs for the initial set up… but clearly, direct deposit is the fairest form to get electronic transfer of funds.
February 19th, 2009 at 5:19 pm
The way things are going, the state will send my money directly to the US Treasury so I can pay for everyone else’s mortgage.
February 20th, 2009 at 7:16 am
An article about the same thing:
As an aside, at least you are keeping the bank workers in jobs? lol
March 3rd, 2009 at 7:11 am
I am also unemployed in NY, and you can select direct deposit when certifying on-line or on the phone each week. I’m sure that Chase did push this agenda for the fees, at least. So many people have to use a foreign ATM because, as I found out checking for ATM locations, there are not many branches in upstate NY. The closest one to me is 1 hour away.
March 15th, 2009 at 1:01 pm
I just got scammed for $1.50 for inactivity from JP Morgan Chase.