Federal and State governments are rapidly moving away from cash and paper checks and going to the use of pre-paid cards. Such cards enable consumers without bank accounts to benefit from the shift to electronic transactions from cash and to financially mainstream.
As most operators of HUD, Rural Development, and LIHTC properties know, as of March 1, 2013, recipients of Social Security, SSI, veterans benefits and federal government pensions are paid through either direct deposit into a bank account, or a pre-paid debit card – the Direct Express Card. This is part of a broad trend toward electronic transactions replacing cash and paper checks.
The Federal Deposit Insurance Corporation (FDIC), estimates that 17 million adults in America do not have a checking or savings account. This is about 8 percent of all households.
Pre-paid cards are becoming a familiar product for an increasing number of Americans. 41 states and D.C. use pre-paid cards to distribute unemployment benefits. Several states also use pre-paid cards for tax refunds, although for now, federal tax refunds are still distributed by check.
A wide variety of pre-paid cards exist. Following are some of the more common types:
- Government Issued Pre-Paid Cards: These have been available for more than ten years, both to access in-kind benefits such as Supplemental Nutrition Assistance (“SNAP”) and to replace cash. The cards provide either paper statements to show card activity or access to a 60-day written account history by request.
- Prepaid Payroll Cards: A growing number of employers issue prepaid cards – known as payroll cards – to workers who choose not to enroll in direct deposit programs. One such employer is Walmart, which in 2009 began issuing payroll cards to its employees.
- General Purpose Reloadable Prepaid Cards: These cards are issued both by traditional banks and other distributors such as GreenDot and NetSpend.
For housing purposes, HUD has indicated that these prepaid cards should be treated in a manner similar to savings accounts, in that the current balance (within 120-days of the certification effective date) should be considered as a cash asset. Virtually all of these cards permit verification of current balances by ATM, phone, or computer printout. Managers should accept such documentation as verification of the value of the prepaid card account.