Home > 2011 > Personal Finance > Report: States Let Banks Charge Unemployed Workers “Junk” Fees

Report: States Let Banks Charge Unemployed Workers “Junk” Fees

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Paying unemployment benefits with prepaid debit cards instead of paper checks may seem like an obvious win-win. States get to save money on printing checks. And people who are out of work get to avoid spending precious money on check-cashing fees.

But in many states, prepaid cards are actually a win-lose, according to a new report by the National Consumer Law Center. States do save money. But in many cases, unemployed workers are hit with exorbitant hidden fees that could cost them considerably.

“These junk fees stack the deck against unemployed Americans,” Lauren Saunders, author of the report, said in a conference call with reporters. “Unemployed workers need every dollar and they don’t need bank tricks.”

The fees associated with prepaid unemployment debit cards vary state by state. Users in Arkansas pay $20 every time they overdraft their card. In Florida, unemployed people pay $2.25 every time they withdraw cash from an out-of-network ATM, plus up to $3 every time they talk to a human teller. Twenty-four states charge fees every time a user tries to make a purchase that is denied for insufficient funds.

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Of all the states, Tennessee’s program is the worst for workers, Saunders found, because it charges every type of fee available. The state’s card charges up to $1.00 per ATM withdrawal, with no free withdrawals up-front. The card charges users a fee for checking their balance and another fee for denied transactions in which the user doesn’t have enough money to cover a purchase—a Catch-22, the report finds. The Tennessee card also charges users a quarter every time they make a debit purchase.

All money from the fees goes to Chase Bank, which operates the card program for the state.

“We think overdraft fees are totally inexcusable in general, and especially when they’re charged against unemployed workers,” Saunders says.

The organization called on states to renegotiate their agreements with the banks to get rid of “junk fees,” Saunders says. States also should make it free and easy for people find their account information, and should do a better job encouraging people with bank accounts to receive unemployment benefits by direct deposit, according to the report.

The states with the most favorable prepaid unemployment benefit cards are New Jersey and California, Saunders found. Both states charge fees only for ATM withdrawals outside of the bank’s ATM network, and both states allow a number of out-of-network withdrawals for free before they start charging fees.

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Image: smlp.co.uk, via Flickr

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  • SeriouslyNow

    This gives a whole new outlook on why Chase Bank customers are seeing so many TV commercials that advertise “how easy” it is to swipe your Chase Debit card. They just fail to mention those “fees”.

    To say this practice is atrocious would be an oxymoron. I spent sixteen years in the banking business 20 years ago when we used to give potential customers “giveaways” to bring in deposits. NEVER would I ever have believed banks would get away with charging those customers to withdraw THEIR OWN MONEY and charge to SPEAK TO A TELLER at the bank.

    There IS one solution to these greedy practices. Since our politicians don’t want to stop these kinds of abuses by banks, for fear of losing campaign contributions, THE PEOPLE NEED TO PRESSURE THESE BANKS THEMSELVES. The sad thing is that our most vulnerable, the unemployed have NO choice as to where they can do THEIR banking. For the rest of us who have a family member who is caught in this quagmire, we DO have the ability to transfer our money out of banks and into CREDIT UNIONS which are member owned instead of Washington, D.C -owned.

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  • Tanya Williams

    I keep hearing how big banks, “for profit” medical insurance (surely an oxymoron!) and corporations bereft of any kind of humane morality are raping and pillaging the American people who are totally helpless because of your insane political system based on those that have the greatest contributions wins. (Government for the people by the people..You’ve got to be kidding! More like, Government by the lobbyists for the corporations!). I say let them rape each other. To all those not exorbitantly rich enough to live, eat, pay rent, have education, have medical care…..come to Australia!! At least we have a social conscience. Big business is allowed to make profits but not at the expense of those less fortunate or the working poor!! If you all started leaving your country there would be no flesh for the corporations to feast off. Signed, concerned world citizen.

  • Ken

    I just noticed a $2.86 charge on my BofA credit card for a “Foreign Transaction Fee” which I wouldn’t begrudge them except for the fact that it was charged on an internet purchase with a US owned and based company. WTF? I could see if I were traveling in a foreign country, but to randomly apply this junk fee to a US citizen, in the US, purchasing from a US company?

    These criminals must be brought to task for padding their multi-million dollar bonuses by robbing customers using the excuse of one non-sense fee or another. You would think that after these idiots who created the economic mess we’re currently in were bailed out on the backs of the US taxpayer so they cover their billion dollar failed gambling debts (yes, derivatives, illegal in every other country on the planet as well as ours up until 2000 because they are backed by no real assests), that these folks would be the slightest bit grateful, but alas, no they aren’t. They still want their excesses paid for by the very same taxpayers that saved their hides a few short years ago. Goes to show that they, nor the legislatures that support them, haven’t learned a thing.

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