Report: Gov’t Prepaid Offers Savings for Agencies, Recipients (June 26, 2013)
June 26, 2013
Using prepaid cards for benefit payments to individuals can help reduce costs for government agencies as well as recipients, according to a new report by the Association of Government Accountants (AGA). The study was conducted by the AGA’s Corporate Partners Advisory Group (CPAG) research project, sponsored by Visa.
The report was based on interviews with 10 government agencies that have implemented a prepaid card benefit program. Those surveyed included nine state agencies within eight states, along with the U.S. Department of the Treasury’s Financial Management Service. All of the agencies “were pleased with their programs,” according to the report, with respondents citing lower distribution costs compared to paper checks, widespread retailer and ATM acceptance, lower fees for recipients and added security among the key advantages of prepaid programs. Low program implementation costs also were a major draw for the agencies, eight of which cited cost saving as the main motivation for establishing a prepaid program. The Treasury Department, for instance, said it costs $1.05 to issue a benefit check—a cost that quickly adds up with the millions of checks issued each month. Treasury projects overall saving of $1 billion over the next 10 years by moving Social Security, Supplemental Security Income and other paper check payments to prepaid cards.
But it’s not just government agencies saving money with prepaid, the report noted. With direct deposit into a bank account not an option for the estimated 8.2 percent of U.S. households unbanked as of 2011, prepaid cards provide a cost-effective alternative to paper checks, which often include high service fees. Despite criticism from consumer advocates, who claimed that prepaid cards associated with unemployment benefits disbursement were laden with fees, the report estimates that U.S. unemployment benefit recipients saved between $100 million and $389 million in 2011 by using prepaid cards versus check cashing services.