Social Security Switching to Electronic Payments in 2013

Posted: 5/14/2012


The Treasury Department announced that they will discontinue mailing  out paper checks to beneficiaries receiving federal benefits (including Social  Security) next year.

Once in effect, people who receive Social Security, veteran’s benefits,  railroad pensions and federal disability payments will need to choose between  direct deposit and a debit card to receive their benefits.

This switch is mandated by a Treasury rule issued in December 2010, with the  main purpose of reducing the costs required to mail out paper checks.   However, this change will also help reduce fraud, as there will no longer be  checks floating around for people to steal.

Note: If you are currently receiving your benefits electronically then this change will not affect you.

People who are receiving federal benefits by check will need to switch to  electronic payment by March 2013.  You can choose to get your payments by  direct deposit to a bank or credit union account or to a Direct Express® Debit  MasterCard® card account.

If you choose the debit card option, then once you receive your debit card  your benefits will be deposited directly to your card each month.  The  debit card can be used at any retailer that accepts MasterCard, or cash can be  withdrawn from any ATM.  There will not be any fees for using the debit  card to make purchases, and beneficiaries can make one free ATM withdrawal each  time a payment is registered to the card.  Additional withdrawals will cost  90 cents each, and the owner of the ATM may also impose fees.

Some of the benefits of receiving electronic payments include:

  • Electronic payments are safer.  According to Walt Henderson, the  director for the Treasury Department’s electronic funds transfer division, over  540,000 federal benefit checks were reported lost or stolen in 2010.   Having your benefits deposited directly into your bank account will eliminate  the possibility that your check will be lost or stolen.
  • Perhaps the biggest reason is how much money will be saved by switching to  electronic payments.  This switch is expected to save the federal  government approximately $120 million per year.  Social Security alone is  expected to save $1 billion over the next 10 years!
  • Other benefits include eliminating the need to go to the bank each month, or  having to find/hire someone to go to the bank if you are unable to get there  yourself.

As with any change, there are concerns as well.  One of the biggest  concerns is that people who don’t have bank accounts will not transition to  debit cards easily.  And of course, debit cards can be lost or stolen,  which brings the chance of fraud back into the equation.  As a result AARP  is requesting that some people be given exemptions from the requirement that  they must switch to electronic payments.

Currently, there are a few exceptions.  For example, people who are age  90 or over will not be required to switch to electronic payments.    Other exceptions will be made in extreme, rare cases, such as if using a debit  card would be a hardship for an individual.

The federal government is trying to educate people well in advance of the  switch.  For more information about the upcoming change, the government has  created a website, and a toll-free phone  number, 1-800-333-1795, people can call for assistance.

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