Bank Fees Charged To Unemployed Workers

Talk about kicking people when they are down.  Recent news reports have shed light on several large banks charging bank fees to customers for the privilege of accessing their unemployment benefits.  Many states are partnering with banks to issue funds on a prepaid debit card, rather than cutting paper checks, in an effort to reduce costs.  The problem is banks are then turning around and hitting unemployed workers with fees for everything from accessing their money to calling for balance inquiries.

From a recent Yahoo story:

Arthur Santa-Maria, a laid-off engineer who lives just outside Albuquerque, N.M., said he didn’t pay any fees the first time he was laid off, for several months in 2007. His unemployment benefits were paid by paper checks. He found a new job last year but was laid off again last fall.

This time, he was issued a Bank of American debit card — a “prepaid” card in industry lingo — but he was surprised to learn he had to pay fees to get his money. He asked the bank to waive them. It said no. That’s when Santa-Maria called back to ask how to check his account online. He logged on and saw that the call cost him a half dollar. To avoid more fees, Santa-Maria found a Bank of America ATM at a strip mall and withdrew $80 at no charge. When he got back to his car, he decided to take out the rest of his money — $250 — and deposit it in his bank account.

Afterward, Santa-Maria logged on to his account and saw a charge of $1.50 for two withdrawals in one day.

To play devil’s advocate, most banks do offer a free alternative to withdrawing unemployment benefits.  Customers may walk up to a teller and ask for a cash advance for the full amount on the card, and they should not be charged a fee.  The problem is most people are using the card like a debit card (after all, that is what it is marketed as) and making small purchases and withdrawals all along.

I am not totally against the idea of banks charging fees, after all there are costs associated with operating ATMs such as maintenance, and reconciliation of the funds.  However, it seems that an exception could be made in this case, especially since many banks recently received a portion of the billion dollar bailout!

With passage of the recent stimulus bill, unemployment benefits will receive a boost, which means banks will likely see an increase in the number and volume of these types of transactions.  I would like to see state governments work with both banks and consumers to find an alternative method of transferring money to benefits recipients. 

One idea would be to simply direct deposit the unemployment benefits to existing checking accounts where consumers bank.  Most recently-employed workers are probably familiar with this format anyway as they likely received paychecks via direct deposit before they were laid off.  This would be a more cost-effective method of transferring benefits than paper checks, and would allow unemployed workers to maintain their previous banking relationships and use existing debit cards and ATMs to access funds.


  1. This is great! Another instance of the banks — receiving a nice chunk of taxpayer dollars — sticking it to the taxpayer. I agree with Mark that banks should be more transparent. Sure, charge the fees, but make sure you are honest about them. I have a feeling that the debit card banks are “selling” hasn’t really been very well explained.

  2. I am not against banks charging for services, just like shops charge for their goods. But the charges should be fair and appropriate to their costs.

    Because banks are not open about their costs you cannot judge if their charges are fair. And it is this evasion that lead us to where we are now.

    Banks need to open up their businesses for scrutiny by you and me, in plain english with no evasive language or techniques. Then we will trust them to run ‘our’ money properly again.

    No honetsy no bail out. What ever the cost to some bankers bonus!

  3. This is nuts – I understand when you “opt in” to buying one of these cards and understand what you’ll be charged and why. But this is a government program we’re talking about, and your options seem to be limited. I’m all for bank profit, but I don’t agree with forcing anyone into any arrangement without another choice.

  4. I can personally relate to this post, having recently had to deal unemployment. We opted to go in to our credit union each week and withdraw the full amount off the card to deposit into our regular account. To do so, we had to go in, the teller had to run the card and then issue us a paper check. After it was endorsed, then she could deposit it. It was a huge pita for them, and a nuisance for us. Had we opted to use it as a debit card, a $2.00 per transaction fee would have been accessed.

    The banks are surely making more money off this venture than the state is saving by not cutting paper checks. It’s frustrating.

  5. Direct deposit is a good thing, but it also costs a fee to use. Usually the depositor pays the fee, so you never know about it. Many businesses will only do direct deposit if there are enough employees for it to become more cost-effective than plain paper checks.

    Having worked for a bank, yes, there are fees for just about anything but that’s to pay for all the redundant employees they have. Between the FDIC and the bank regulatory committees and other government audits, the banks are pretty much wide open to scrutiny. They pretty much have no way to funnel funds, hide them or even steal their own cash. It’s monitored quite closely for fraud and theft and shady investments. Now as to what they spend their own fee revenues on, that’s up to the company (bank) itself. They are a company after all, not the government, and shareholders can get statements of spending and earning and all that stuff from the bank once per quarter.

    Even if banks were more transparent, that really wouldn’t make much difference. As an example, the government is about as transparent as an entity can get, what with their salary amounts on file, spending reports and the tracking of who voted for what and what was in the bill, and still we the “shareholders” don’t have a bit of say in what goes on over there. They voted for the “stimulus” bills on their own. I would hazard a guess that if there were a general referendum, it wouldn’t have passed.

  6. I’m not surprised. I’ve commented before about BANK OF AMERICA’s business practices and customer service.

    Please, take my advice, and stay as far away from BANK OF AMERICA as you can!

  7. The bank has the right to charge whatever fees they wish. It is the customer’s responsibility to avoid these fees, which may mean changing banks. I am very fortunate to do business with a credit union and they haven’t charged me any hidden fees.

    I’m sure that there was a Terms of Use pamphlet or disclosure of the usage fees somewhere and what likely happened is that the fine print was never read by the customer. Fair? Sure it is. It is not the bank’s responsibility to make sure you understand the terms and conditions of your account, it is your responsibility.

    That doesn’t make it right, I think its pretty pathetic how the banks take from the people who need their money, which is basically anyone but the bank. Ah well, maybe after this financial situation settles down we’ll all have learned our lessons the hard way and be financial geniuses.

  8. Don’t mis-understand me. I do believe banks should charge for the service they provide. It is also the customers responsibility to check out the deal.

    But I am sure it is the same in the USA as here in the UK, banks do not explain in simple English their business. I am not being mean or wish to put people down, but the vast majority of people the world over are financially illiterate.

    Therefore just like on a tin of baked beans the bank should do what it says on the tin, and not flower it up to confuse. In my opinion it is more profitable to keep the customer illiterate.

  9. Strange, every time I signed up for an account all the terms and conditions were written in pretty straightforward English. Now if you want really confused wording, try reading any sort of government bills or laws. Those don’t make any sense whatsoever. Granted, with the bank papers there’s a lot to read, but you may take your time to read it if you are uncomfortable with signing anything. If they pressure you to sign without reading, then walk away. Many people are too lazy or milquetoast to figure out for themselves what they are signing for. We can debate all day long what is “fair” and what isn’t but the logistics involved in everyone being treated “fairly” are just impossible. If anything in life was fair, we’d have fixed the darn whole system a long time ago. On a personal level, people should learn from the experience and not fall into the same hole again. If more people learned from it, it is less likely to happen again. Some change works better from the bottom up, not from the top down.

  10. Most posters missed the point. People did not sign up for these debt cards. They were issued by the state unemployment office. In Colorado an American Express card is issued. The unemployed person shouldn’t take it in the shorts to use the card just because the state is too lazy to issue a check or DD the check into a checking/savings account. I smell kickbacks. I think the companies that pushed the CC on the state unemployment offices offered some kind of grease to the state agency person responsible for signing off on these deals. I think a class action lawsuit on behalf of the injured parties (enemployeed persons) against the states that do this would stop this nonsense.

  11. The whole debit card idea, I thought, was to make things easier, not harder!!

    A charge to just talk to a bank rep? Now that it just totally outrageous!!

  12. Quite right almost there, but rather than suing the state and paying the injured parties from the taxpayer’s money, they should be able to sue those politicians who were greased and put this plan together in the first place. That way it (hopefully) doesn’t happen again.

  13. I am in that boat, so to speak, collecting unemployement “benefits” in Missouri. You do not have the option to NOT have the debit card. Yes, you can arrange to have it direct deposited to your checking account, but my thought on that was… I did not want the government in my checking account. The card works similar to a debit card in that you can pay for your groceries, etc, with it, and you can get cash back at the point of sale just like on a debit account. But, as far as getting just cash… you have only certain banks that will allow you to withdraw, ATM or otherwise, without a fee. You can track it online and make transfers online to your bank account…but I did that ONCE, and realized after the fact that it was a $2.50 charge for that. (yes, it does say all the charges you will incur if you read the stuff online, even to make a phone inquiry about your status, online is free) I realize this must be much less expensive for the government…but, I also think that it is taking advantage of a disadvantaged group of people. And I also think it is another “outsourcing” going on… like convicted folks on house arrest need to “rent” their equipment from a company in business to do that. It’s all about the money.

    Oh, and I also have to pay income tax on those unemployment benefits. As a single person with a limited amount of deductions, I ended up owing money for the first time in my life. Oh yeah, you can have taxes withheld from it, but it’s little enough money as it is.

    Many companies are going to a payroll system such as this and for the folks that don’t have checking accounts to direct deposit to and just cashed their checks weekly, this can be confusing. But, once again, it’s all about the money. I really can’t fault them for that, but gee wiz. We don’t ever see cash anymore, or even paper checks. That in itself might be a scary thing.

  14. To DavidK… “On a personal level, people should learn from the experience and not fall into the same hole again. If more people learned from it, it is less likely to happen again.”

    What I am learning from being unemployed will NOT keep me from being part of a workforce reduction again. What I hope others learn is that NO ONE is immune to that. There is no such thing as job security anymore. Count your blessings if you are working and KNOW your job is secure. And as little as I might be allowed on unemployment, I am thankful that i do not have children to feed. How I get the money is almost immaterial, but it might be nice if what little I am allowed, I could actually keep it all.

  15. Bank of America is the worst! We had our checking and savings with them and their practices are dishonest. We have USAA now and LOVE them. They are honest and really seem to care about their customers financial position.

  16. @Linda K., I’m sure you think that you will not learn anything from having become unemployed but having been laid off a number of times myself, believe me, you will. There are some things that you pick up on, skills for interviewing, questions to ask of future potential employers to give you insight into how they run their business, things to look for during employment to make you aware that a layoff may be imminent and you may even learn to appreciate some job in the future even though you may not see it now. After my first layoff, I was quite traumatized and just flabbergasted at how little the unemployment compensation was. It definitely made me more determined to save for a rainy day — which did happen at my very next job. (Way to get me again, life!) Thank goodness I had my savings to help out. The job I have now isn’t perfect or even very good, but dammit I make it work as I am quite happy just to be employed during this recession. Having survived several layoffs makes me appreciate it more. I hope that things turn out ok for you too Linda.

    There are things to be learned from every situation, though they are not as obvious or as imminent as they may seem.

  17. Thank you for your response David K… I appreciate it. I really am looking forward to be working again, if only to feel productive and part of society again. I know things will work out fine, but yes, you do feel kind of cut off at the knees at first. I actually look at this as an opportunity to explore my options and see what’s out there. Thanks for your comment.

  18. I am in texas on unemployment for the second time in three years. In 2006 when I was receiving benefits I had them direct deposited into my account no problem. Eveeryone was happy. This past november when I was laid off again I found out that my only option was to receive my funds on a chase visa debit card.

    I think I would rather have an option to pay a flat rate fee monthly to have my money deposited directly to my account. Something around 2.50 or 3.50 a month I think would be reasonable. Something to cover general costs. I pay a one time fee and deal with my bank. Same thing for people who desire a paper check. If that’s what they want to deviate from what the state wants charge a fee and let us pay for what we want. DOn’t force me to have no option and to pay for what is really inconvenient. Why should an unemployed person need to waste gas, drive to find a bank (in dallas the chase banks are scarce) make a decent sized withdrawl and then get in the car (because all these transactions have to be done inside a banking center because you are really not an account holder) and drive over to my own personal bank and make a deposit. The time and money is worth me paying a few bucks a month to get my money the way I wish to get my money.

  19. My son has recently been battling with the state of Missouri’s unemployment debit cards. Apparantly there are no fees to use them at the grocery store or gas station, but there are to withdraw cash. So you get penalized if you need cash to pay your rent or some other bill that can’t be paid by VISA or Mastercard. I doubt it would cost the state any more to do direct deposit
    so people could continue to use their own banks with much better perks–ours is currently offering 5% interest on checking accounts with at least one direct deposit per month and you MUST use your debit card at least 15 times in the month (no fees to use).