Life Before Direct Express®

From Paper Checks to Virtual Banking

Over a decade ago, the U.S. Department of the Treasury’s Bureau of the Fiscal Service, was faced with the challenge of phasing out paper benefit checks in favor of an electronic payment option. What made this task even more challenging was the fact that millions of American beneficiaries did not have bank accounts or a means of receiving electronic payments.

The Direct Express® card, was the solution to this challenge, allowing electronic payments to be received and made through a network-branded prepaid debit card. What’s more, it had a valuable effect over and above the efficiencies it has created for the government and the taxpayer money it saved.

It is a far cry from the days when those who did not have bank accounts received paper checks and conducted all of their personal transactions in cash. This had a number of drawbacks, including the following;

• On payment day, the paper check system was susceptible to mail delays caused by bad weather, which could delay receipt by days – difficult when there are bills to pay, and especially problematic when natural disasters happened.

• Paper checks could be lost or stolen, a danger that a recent change of address would not work its way through the system quickly enough.

• Once the paper checks arrive, they needed to be converted to cash so that bills could be paid. For city dwellers, this meant a trip to the check casher down the street, but for rural people, this often involved a bus ride or at least time away from work.

• Check cashing costs money. The national average is four percent of the check’s face value. A 2009 report estimated that check cashing services cost employees $1,042 a year (Note 1) and a low wage earner can spend as much as $40,000 over his lifetime in check cashing fees (Note 2)

•  Once a paper check was cashed, the beneficiary had to carry the cash. This rendered them vulnerable to crime or even accidental loss.

• Paying rent and utility bills often required cash be turned into money orders. This costs money and once the money orders were secured, bills had to be paid in person.

• Paying bills in person, like cashing checks, also often involved trips on public transportation, and time away from work.