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Changes Coming Next Year In How You Receive Social Security Payments

The government will no longer issue paper checks.If you’re one of the tens of millions of people who receive Social Security or other federal benefit payments, you should know this date: March 1, 2013.

After that date, the government will no longer send out paper checks. It will only make electronic payments.

The goal is to save taxpayers the $120 million annual cost of printing and mailing checks.

Since May 2011, all new applicants for federal benefits have had to choose an electronic payment option.

If you haven’t already, you must select a payment option, too. For most, that means a direct deposit at your bank or credit union.

But if you don’t want direct deposit or don’t have a bank account (or if you fail to make a choice), you’ll receive your money through the Direct Express Debit MasterCard (www.usdirectexpress.com).

Unlike many prepaid debit cards, some of which charge outlandish fees and are a major consumer ripoff, the Direct Express card has few fees, including no monthly fees. Indeed, the card’s website says “it is possible to use the card for free.”

In reality, however, it isn’t completely free.

For example, you get one free domestic ATM cash withdrawal for each deposit posted to your account. For many people, that works out to once a month.

Subsequent withdrawals cost 90 cents each if you use a participating Direct Express network ATM. Those fees could add up if you’re a heavy ATM user.

The Direct Express card does have some other drawbacks, especially if you don’t have a checking account.

For one thing, you can’t pay your bills with it unless the merchant accepts debit MasterCard. Unfortunately, a lot of companies, such as utilities, don’t.

Direct Express advises that you can use your card to pay your bills by buying money orders at the U.S. Post Office. However, those cost $1.15 each for money orders of $500 or less and $1.55 for orders between $501 and $1,000.

AARP claims it has a more attractive and versatile card than the government’s card. It’s called the AARP Foundation Reloadable Prepaid MasterCard (www.aarpfoundationcard.com). It’s issued by Green Dot, one of the largest providers of prepaid cards.

The AARP card carries a fairly pricey $5.95 monthly fee. However, that fee is waived in any month you have a direct deposit of at least $250, make at least 30 purchases or load at least $1,000 to the card.

The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012, so the monthly fee is easily avoided for most people.

Here’s a look at the details of the AARP reloadable prepaid card:

Monthly fee $5.95, but waived with a direct deposit of $250 or more.
ATM Withdrawal Fees Free at in-network machines; $2.50 at out-of-network machines.
Other features Free online bill payment, ability to load additional funds.
Verdict This card is more versatile than the government’s Direct Express card, but make sure you avoid the monthly fee.

Another big advantage that the AARP card claims to have is free online bill payment and free ATM transactions.

There is no minimum payment amount, but there is a $1,000 limit on each individual bill payment. There is also a daily spending limit of $2,500 on the card.

ATM transactions at participating locations are unlimited and free, but $2.50 for cash withdrawals out of network, plus any fee the ATM owner may charge.

In addition, as the name implies, the AARP card allows you to load your own funds to the card, not just your benefit payments. The government’s Direct Express card doesn’t appear to allow you to do that.

Reloading the AARP card with direct deposit is free, but up to $4.95 at a retailer.

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