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Published: Saturday, 2/21/2009

Jobless benefits carry fee potential


For hundreds of thousands of workers losing their jobs during the recession, there's a new twist to their financial pain: Even as they're collecting unemployment benefits, they're paying bank fees to access their money.

Thirty states have struck deals with banks that include Citigroup Inc., Bank of America Corp., JPMorgan Chase, and US Bancorp, an Associated Press review found. All the programs carry fees, and in several states the unemployed have no choice but to use debit cards they are issued. Some banks charge overdraft fees of up to $20 - even though they could decline charges the card won't cover.

"It's a racket. It's a scam," said Rachel Davis, 38, a dental technician from St. Louis who was laid off in October. Ms. Davis was given a MasterCard issued through Central Bank of Jefferson City and recently paid $6 to make two $40 withdrawals.

The banks say their programs offer convenience. They also provide at least one way to tap the money at no charge, such as using a single free withdrawal to get all the cash at once from a bank teller. But the banks benefit when people treat the cards like the other plastic in their wallets.

The fees are raising questions from lawmakers who just recently voted to infuse banks with taxpayer money to keep them afloat.

The Ohio Department of Job & Family Services began issuing unemployment benefits on debit MasterCards on Feb. 1. Paper checks will be phased out in August. Recipients will choose between the new "Ohio EPPICard" program or direct-deposit of payments into bank accounts,.

Users who decide on the state card will be able to get cash free from tellers at many banks and also will be able make purchases at stores without a fee. But there will be fees for withdrawals at ATMs, according to a memo to local officials last fall. A spokesman for the state jobless agency was unsure about the size of fees.

Neither banks nor credit card companies would release their profits from the programs, or what proportion of the revenue comes from user versus merchant fees or interest. But with the national unemployment rate at 7.6 percent, the market for bank-issued unemployment cards is booming.

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