(Wall Street Journal) — Instead of paper checks, Oregon officials pay weekly unemployment benefits by loading the money onto debit cards that come with several unusual fees. After she found a job last year, 48-year-old Jennifer Schmidt of Riddle, Ore., was charged an “inactivity fee” of $2 by U.S. Bancorp for not using her debit card once she stopped drawing unemployment. The $2 fee sank the balance on her card into the red, triggering an overdraft fee of $17. ”How is it possible that the bigwigs in government can’t get a better deal for us?” she says. More than 40 U.S. states use prepaid debit cards to funnel unemployment benefits, child-support payments and other funds to recipients. Getting rid of paper checks and postage is hard to resist for cash-strapped governments, which last year steered $53.2 billion in unemployment benefits and child-support payments to prepaid debit cards, up 33% from 2009, according to Mercator Advisory Group Inc., a research firm in Maynard, Mass. Such cards made up 32% of the overall prepaid debit-card market in 2010. Banks are barreling into the business, led by J.P. Morgan Chase & Co., the second-biggest U.S. bank in assets, which has contracts with 21 states. U.S. Bancorp, based in Minneapolis, has contracts with 16 U.S. states. The nation’s largest bank by assets, Bank of America Corp., has deals in five states and will start issuing debit cards for California’s unemployment benefits in July.
