US rolls out Social Security benefits on debit card

By David Lawder

WASHINGTON, June 10 (Reuters) - The U.S. Treasury on Tuesday is rolling out another tool in its efforts to cut down on the millions of paper checks it sends out daily -- a debit card loaded with Social Security benefits.

Social Security recipients can choose to receive their monthly benefits directly via the Direct Express Debit Master Card, a program that promises to save both the Treasury and American seniors money.

The option is being heavily marketed to the four million Social Security recipients who do not have bank accounts and must pay fees to check-cashing shops and other vendors to access their funds.

"Basically, they can very well use this card for free," said Judith Tillman, commissioner of the Treasury's Financial Management Service.

FMS research shows that seniors without bank accounts pay an average of $6 and as much as $25 to cash each Social Security check, eating into often low monthly incomes. This also makes them more vulnerable to check fraud as well as robbery when carrying large amounts of cash, Tillman said.

Switching to the debit card affords Social Security recipients the ability to withdraw funds at nearly all bank teller counters for free, and to make free "cash back" withdrawals when they buy goods at retailers.

They can also make one free monthly withdrawal from some 50,000 automated teller machines in the Direct Express network.

Participants can also check balances free at any ATM, Tillman said, adding that the program could help turn many recipients into full banking customers.

"I think this is one of the ways we get people into the financial system. This is a debit card, but once people sign up for this, they are in the financial system," Tillman said.

The debit card will also save the Treasury money -- 88 cents for each paper check that is eliminated. If all four million non-banked recipients were signed up, the annual savings would top $42 million.

MasterCard International (MA.N) will collect transaction fees from retailers who accept the card and Dallas-based Comerica Bank (CMA.N) is issuing the card, which can also be loaded with other federal payments such as Veterans Administration or Railroad Retirement benefits.

The card is already available in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina and Texas. It will be rolled out nationwide later this summer. There is no sign-up fee for recipients, who can enroll online (www.usdirectexpress.com) or by phone (1-877-212-9991).

The card rollout coincides with another effort to persuade federal benefit recipients to forego paper checks in favor of electronic payments. The Go Direct campaign encourages recipients with bank accounts to switch to direct deposit as a safer, faster alternative.

Tillman said 80 percent of Social Security payments are now made electronically, but the Treasury still cuts 150 million checks a year. "We're still making a lot of check payments. We really want to get those numbers down." (Reporting by David Lawder; editing by Gary Crosse)