'Junk fees' abound on prepaid debit cards used for unemployment benefits

Portion of credit card

If you're receiving unemployment benefits through a prepaid debit card, you've got to pay close attention to the fees you're being charged to access that money.

A recent study from the National Consumer Law Center found that most of these cards are littered with what it calls “junk fees.”

Forty states, soon to be 41, now pay unemployment benefits using prepaid debit cards.

The study found that:

22 cards charge fees at network automated teller machines (ATMs), and all charge for using out-of-network ATMs.
24 cards charge ATM balance inquiry fees.
24 cards charge fees for every transaction that's denied because there is not enough money in the account to cover the purchase.
5 cards allow recipients to overdraw their account -- and then impose $10 to $20 in overdraft fees for each transaction.
16 cards charge for calls to automated customer service menus.
28 cards charge inactivity fees.

The center said the best prepaid debit cards used for unemployment compensation are offered through Bank of America in California and New Jersey.

The single worst fee, in the law center's opinion, is the overdraft fee that can be incurred by recipients using U.S. Bank cards issued in Arkansas, Idaho, Nebraska, Ohio and Oregon.

The overall worst card for junk fees was judged to be the one issued by JPMorgan Chase and provided to the unemployed in Tennessee.

With the average underemployment benefit coming in at just $294 a week, recipients can ill afford to throw any of it away on frivolous bank fees.

Our best advice to anyone who receives such benefits on a prepaid debit card: Keep the fee schedule handy, and keep careful track of your balance and how often you use your card.

Anyone who's read our ABCs of prepaid debit cards knows they can be costly to use.

The ones that many state governments have hired to provide unemployment benefits seem to fit right in.

Follow Interest.com on Twitter.

Leave a Reply

Your email address will not be published. Required fields are marked *