Felix Salmon

Yesterday saw the launch of Gobank, an exciting new bank from Green Dot. If you know about Simple, it’s at heart the same thing: mobile-first, no fees, very easy to use, and built by Real Internet People. (Green Dot acqu-hired Loopt for $43 million last March, giving it the requisite tech savvy to build Gobank; and indeed Green Dot itself was a Sequoia-backed startup, once upon a time.) At both banks, you basically do everything with either the app or your debit card — but although Green Dot is new to the bank-account space, it has been offering debit cards for many years, and so has pretty well-tested technology on that side of things.

Gobank does have some advantages over Simple. For one thing, as part of a large public corporation, it has more resources at its disposal, and is able to launch in fully-fledged form, with mobile check deposit, iPhone and Android apps, and the like. (At Simple, these things come slowly.) Gobank even offers you the ability to transfer money easily and directly from Simple, or any other checking account, straight into your Gobank account: you just type in your debit card number and your security code, and transfer as much money as you want. And because Green Dot has a lot of retail locations, it can offer something Simple will never have: free cash deposits.

More importantly, Gobank is, actually, a bank. (Simple, by contrast, is basically a smart front end built on top of Bancorp.) That means, at least in theory, that it can iterate more quickly than Simple, which needs to work with Bancorp in order to add features. And in terms of marketing, Gobank can sell itself as being a bank; Simple can’t.

Gobank is great news for consumers: it means that simple, no-fee, debit-card-based banking is really entering the mainstream, and might even get picked up by mid-sized commercial banks at some point. (It doesn’t make sense for banks with more than $10 billion of assets, because they can’t get the higher interchange revenue which makes Gobank and Simple workable.) It also means — I hope — that rip-off prepaid debit cards are going to become increasingly marginalized. Given the choice between a prepaid debit card and a Gobank account, it makes no sense at all to get the prepaid debit card: the bank account is superior, and cheaper, in all respects.

I asked Green Dot CEO Steve Streit about this yesterday, and he said that demand for prepaid debit cards rarely intersects with demand for checking accounts; he’s targeting Gobank at people who want a checking account, not at people who want a prepaid debit card. That’s fair enough. But as prepaid debit cards start looking more and more like bank accounts (think Suze Orman’s Approved card, or Amex’s Bluebird card, or Chase’s Liquid card), it’s pretty clear that they’re now going to have to start competing not only with other prepaid cards, but also with the likes of Gobank and Simple.

As far as Green Dot is concerned, Gobank is a big and important bet. Since its blaze-of-glory IPO in July 2010 at a first-day price of $44 per share, the company’s stock has gone steadily south. It rose yesterday, on the Gobank news, but gave up all those gains today: it’s now trading at just $13.30, which corresponds to a market capitalization of less than $500 million. I don’t know what Simple’s valuation is these days, but I’m sure that Green Dot would love to be credited with that kind of value, on top of its debit-card franchise.

I’m sure that Gobank will evolve over time: I don’t really understand the voluntary “membership fee”, for instance, and some of the gimmicks, like the “Fortune Teller” in the app which tells you whether you can afford a certain item, are not the kind of thing that people really want from their bank. But the technology looks solid, and it’s always encouraging when a company shows a willingness to cannibalize its existing customer base. (You can’t make free cash deposits onto a Green Dot prepaid debit card, for instance.)

So here’s hoping that Gobank is a big success, along with Simple and anybody else looking to enter this space. That’s really the best chance we have for the big banks to get forced to make their checking accounts much more user-friendly.

On Tuesday, CardHub’s John Kiernan wrote up an excellent list of the pros and cons of the new Walmart/Amex Bluebird debit card. And one of the cons took me by surprise:

No Automatic Loading of Federal Benefits: Recipients of federal benefits such as Social Security, a federal pension, or VA benefits won’t be able to have them automatically deposited into their Bluebird Prepaid Card accounts.

The whole point of prepaid debit cards in general, and of the Bluebird card in particular, is to help bring checking-like financial services to the unbanked and underbanked. In turn, the main source of income for many of the unbanked and underbanked is federal benefits. It just doesn’t make sense to put out a prepaid debit card and then to say that it can’t be used with federal benefits. So what’s going on?

The answer, it turns out, is something called 31 CFR 210.5 (b)(5)(i): “Where a Federal payment is to be deposited to an account accessed by the recipient through a prepaid card”, says the statute, the account has to be at an insured institution, and it has to have FDIC insurance.

The government is OK paying out benefits onto prepaid debit cards, be they its own card, Direct Express — which has 3.6 million users — or someone else’s, like the new Liquid card from Chase. But if the money’s going onto a prepaid card, that card account has to be FDIC insured. Direct Express, like Bluebird, has no monthly fee, which is great, but it also isn’t reloadable by the consumer: only the government can add new money to it. I should just Venn this, maybe?

I’ve put Simple in the middle, there, because it’s the only solution which covers all the bases — it has no monthly fee, it’s FDIC-insured, and it’s reloadable by the consumer. But good luck getting a Simple account: the waiting list is long, and for the time being you need to have an iPhone. What’s more, people who get federal benefits aren’t exactly a huge proportion of Simple’s young, tech-savvy customer base.

I should note here that all of the options in this diagram are attractive on their own terms; it’s also no coincidence that three of them — Bluebird, Simple, and Liquid — are very new products. The world of prepaid debit cards is evolving very quickly, and if you have an old card, there’s almost certainly a newer card out there which is better. Bluebird and Liquid both go to great lengths to solve the biggest problem with most debit cards, which is that it can be very hard and expensive to reload them when you come into some money: Liquid can be reloaded at any Chase branch or ATM, and Bluebird at any Walmart, for free.

What I worry about, at least a bit, is the way in which Bluebird is being left out in the cold when it comes to the direct deposit of federal benefits. It’s a worthy competitor to Liquid and Direct Express, and it should be allowed to compete on a level playing field. Bluebird, of course, can compete on price. And Liquid can compete on the fact that it’s offering a full-on relationship at Chase, complete with teller access, as well as on the fact that its Mastercard is accepted at more places than Bluebird’s American Express. Certainly if you compare Bluebird to Direct Express, Bluebird looks like a significantly better option, assuming you’re OK with not being accepted at a few Mastercard-but-not-Amex places.

But instead of that kind of vibrant competition, Bluebird is not being allowed onto this particular playing field at all.

Is it reasonable for the federal government to effectively prevent the recipients of federal benefits from getting those benefits deposited directly onto their Bluebird cards? I suspect it probably isn’t. American Express is a trusted vendor: the money on your Bluebird card is just as safe as the money in your American Express travelers checks — and that money has been perfectly safe since they were first introduced in 1891. What’s more, under current money-transmitter regulations, Amex keeps all the money on Bluebird cards in highly liquid form, ringfenced so that it can’t be used for anything else. There are perfectly reasonable reasons not to get a Bluebird card, but lack of FDIC insurance really isn’t one of them.

But that isn’t to say that Amex is some kind of victim, here. After all, American Express owns a very large bank, called American Express Bank, where all deposits are FDIC-insured. If they wanted to, they could have made American Express Bank the issuer of the Bluebird card, rather than American Express Travel Related Services Company. But if they’d done that, there would have been at least two substantial downsides for them.

Firstly, they would have had to start paying into the FDIC insurance fund. Amex won’t reveal how much it pays for FDIC insurance, but that’s certainly an expense which Liquid has to pay and Bluebird doesn’t. More importantly, because American Express Bank has more than $10 billion in assets, it’s covered by the Durbin Amendment, which allows prepaid debit cards to charge premium interchange fees — but only so long as the physical card itself is used in every transaction. As a result, Liquid can’t offer things like online bill-pay, which Bluebird does offer.

Big banks, then, are at a significant disadvantage when it comes to the prepaid space: while companies like American Express Travel Related Services Company can offer cards with bill-pay, because they’re not banks, and while companies like Simple can offer cards with bill-pay, because they have less than $10 billion in assets, companies like Chase cannot offer cards with bill-pay, because they’re both banks and big.

I very rarely favor financial deregulation these days, but this is one area where I do. The more competition there is in the prepaid space, the better prepaid cards become for consumers: that’s clear. And in order to encourage competition, it makes sense to lose two different regulations. The first is 31 CFR 210.5 (b)(5)(i): the federal government should be able to pay benefits onto any approved debit card, whether it’s FDIC-insured or not. I don’t have a simple criterion for which cards should get approval, but in general, if there’s basically zero counterparty risk on the part of the cardholder, then the card should be OK. After all, for years the government was happy mailing out paper checks using the US Post Office, and that was much less reliable as a payment mechanism than a direct deposit onto a Bluebird card.

And secondly I think that big banks, including Chase, should be allowed to offer prepaid cards on the same basis that small banks like Simple can. Ban the practice of charging overdraft fees on prepaid debit cards — which none of these cards offer in the first place — and say that if you’re offering a prepaid card rather than a fully-fledged checking account, then you can still charge the higher prepaid interchange rates.

I’ll admit that the distinction between a prepaid card, on the one hand, and a checking account, on the other, can be a difficult one to discern; Simple, for instance, has elements of both. But if you can write checks on an account, then it’s clearly a checking account; and similarly, if you can transfer money easily from one account to a different one at the same institution, then that looks very much like a bank account as well. More generally, there aren’t all that many banks with assets over $10 billion: there are few enough, in fact, that regulators ought to be able to have a quiet word with them and say listen, we’re doing you a favor here, so don’t try any silly business about reclassifying vast numbers of checking accounts as prepaid debit cards en masse. If someone with a bank account would prefer a prepaid card instead, they’re going to have to close their bank account and open up a debit-card account.

With those two changes in place, a third change would become possible: the federal government could start giving benefits recipients a real choice when it comes to debit-card direct deposit. At the moment, while it’s theoretically possible for people to get their federal benefits directly deposited onto their debit card, in practice it’s vanishingly rare, because the government pushes the Direct Express card quite hard, and says very little about alternative options. But if a number of cards like Bluebird and Simple offer all of the benefits of Direct Express and many more on top, then it seems churlish of the government to steer millions of Americans away from those cards and towards Direct Express instead.

Still, first things first: in terms of sequencing, the sensible place to start here is 31 CFR 210.5 (b)(5)(i). Right now, the federal government is basically making a public pronouncement that the Bluebird card isn’t safe, that it doesn’t trust American Express to look after cardholders’ money, and that people receiving federal benefits shouldn’t have those benefits paid onto the Bluebird card. I see no good reason for those pronouncements to be made, and to weight the scales so strongly in favor of FDIC-insured card issuers. Anybody who wants FDIC insurance, of course, can have it. But if you don’t want it, I don’t see why the government should try so hard to force you to have it anyway.

Prepaid debit cards just keep on getting better — ever closer, that is, to the holy grail of essentially replicating the free checking account of yore. Checking was never actually free, of course: it was basically a bait-and-switch, where people thought that they were getting free checking but then got hit with huge unexpected fees when they could least afford them.

But when hidden overdraft fees and the like were made illegal, and bank fees started becoming increasingly salient and obvious, the search for a checking-account replacement began. And there are two big ones: credit unions, on the one hand, and prepaid debit cards, on the other.

I’ve been a bit disappointed in the way that credit unions in general have responded to the new world of banking. As far as I can tell, most of them have been subdued and cautious when it comes to trying to poach customers from the big banks. And many of them actually opposed the Dodd-Frank law which did so much to protect consumers and to prevent banks from running up hidden fees.

For instance, Patrick Adams, the CEO of St Louis Community Credit Union, was a vocal opponent of the Durbin Amendment, laying out a parade of horribles that he was sure would come to pass were the amendment to be signed into law:

Here’s another surefire lock of a bet. You will be more frustrated than ever. Your costs at the bank will be up. Your costs at the retailer will be up. You will be confused as to which retailers accept your debit card and which ones don’t. You will have no clue what the minimums and maximums of your debit card activity will be because there will be no consistency among retailers. As a result, you will carry more cash and more checks.

I took his “surefire lock of a bet”, and eventually we agreed to settle it in July 2012, once the new law had been in force for a year. Adams sent me a grudging email in August, saying that although he would “pay the $100 to your credit union in the name of helping a fellow credit union do the good works of our industry”, he had also learned that he “will never again be lured into sharing information with someone I thought was an interested party from a credit union perspective to only have it placed as a topic for a blogger”.

The point here is that in many cases — see also my article about Missouri Credit Union — credit unions look and feel very much like banks, with the similarities far outweighing the differences. And so while credit unions are nearly always a better deal than banks, they’re generally not being nearly as aggressive as I would like in terms of trying to be a much better deal.

Meanwhile, prepaid debit cards have been improving enormously. Once upon a time they were nearly all rip-offs; now, they’ve reached the point at which they can start to be a real checking-account alternative, without the fees and the kind of haterage which almost all of us feel towards our bank at some point.

The latest card to hit the market is the Bluebird, from American Express and Walmart. The fee schedule, on the left, is very impressive, starting with the first line, a $0 monthly fee. American Express has had no-monthly-fee debit cards in the past, but nothing with the kind of distribution clout offered by Walmart.

On top of that, if you use this card as a checking-account replacement, then ATM withdrawals are free within the reasonably extensive MoneyPass network. In order to qualify for that, you need to sign up for some kind of direct debit, which is easy to set up from most employers, Social Security, and the like. We’ve seen this incentive to use direct debit in the past: Suze Orman’s Approved Card has pretty much the same thing, for instance. But it costs $3 a month — and, crucially, it’s expensive to reload if you try to put money on it through means other than some kind of bank transfer.

The Bluebird card, by contrast, can be reloaded with cash at any Walmart: pay for your groceries and put any money you have left over right onto your card. And the Bluebird card offers something else pretty revolutionary as well — you can even deposit checks into your account, for free, using mobile check deposit.

Being able to deposit money into your account for free is a key feature of checking accounts which prepaid debit cards have historically had a very difficult time replicating. This is one area where banks have a clear advantage over other prepaid debit-card providers. If you have a debit card from Chase or US Bank, for instance, then you can deposit money into your account at any of their branches or ATMs. But the bank cards have their own limitations: Chase doesn’t offer bill-pay, for instance, while US Bank doesn’t offer check deposit.

Interestingly, the loophole which is making all these prepaid cards possible is exactly the same as the loophole which prevents Chase from offering bill-pay. The Durbin Amendment to Dodd-Frank forced interchange fees on debit cards to come down substantially, while carving out an exception for prepaid cards. So Durbin allowed the prepaid industry to keep on growing — but because Chase is a big bank, it’s not allowed to offer bill-pay on its prepaid card, since at that point it would fall foul of the rules about the interchange fees charged by big banks on their checking-account debit cards.

One interesting thing about prepaid cards is that they’re easy to start up — and, by the same token, they’re easy to drop. People tend to use a single card for no more than a few months at a time — in stark contrast to the many years that they use a checking account. Especially if you’re moving from job to job, it’s as easy to just get a new prepaid card, most of the time, as it is to set up direct debit onto your old one.

Which helps explain why Green Dot shares are down almost 20% today. Green Dot used to be the exclusive provider of prepaid cards at Walmart; no longer. And given the choice, it makes very little sense to choose one of Green Dot’s cards over the Bluebird: the only real disadvantage that Bluebird has is that it’s an Amex card, which means that it isn’t accepted in as many places as Visa and Mastercard.

So expect to see Bluebird make some serious inroads with respect to the Green Dot user base — and expect, too, that Bluebird users are going to be less likely to graduate to a checking account than Green Dot users were. While most checking accounts offer a lot of things which you couldn’t get with a Green Dot debit card, that list is much smaller once you’ve got a Bluebird card.

The number of unbanked households in the US is rising — it’s now at 8.6% of all households, up 0.6 percentage points in the past two years alone. As prepaid debit cards become ever cheaper and more attractive alternatives to checking accounts, and as online startups introduce their own checking-account alternatives, that number is only going to increase.

But the economics here are interesting. I’ve spoken to a number of prepaid debit card issuers, including Chase Liquid and Suze Orman, and they all swear that there’s simply no way they can even break even unless they charge a monthly fee. But now Bluebird has joined Simple in giving out cards where pretty much everything is free, there’s no monthly fee, and you even have access to things like mobile check deposit which are still rare in checking accounts.

And what that says to me is that it’s going to be very difficult to compete as a pure prepaid-debit play, going forwards. American Express and Simple don’t need their debit-card arms to be profitable on a month-to-month basis: they’ve got their eyes on bigger prizes. That’s good for consumers, but it’s likely to mean that the universe of prepaid offerings is going to shrink. If you can’t offer something for free, or very close to free, then increasingly you might as well just not bother.

Almost everybody interested in extending banking services to the unbanked and underbanked is looking very closely at prepaid debit cards. They can do much of what checking accounts do, without the unpredictable fees, the annoying hours, and the general feeling that if you don’t have a lot of money you’re not welcome.

But now the Philly Fed is out with by far the most detailed research I’ve seen on how people actually use prepaid debit cards, in practice. And sadly for anybody wanting to get into this market, they’re not using them as checking-account replacements.

Using an anonymized dataset covering some 3 million cards and 280 million transactions, the Philly Fed did find that prepaid cards are making significant inroads, especially in poorer areas, as you might expect. Employers, in particular, very much like prepaid cards when their employees don’t have direct deposit: give every employee a single card once, and then just deposit their pay directly onto that card, rather than having to deal with thousands of checks every two weeks. It’s a perfectly sensible way of doing things, and in some counties there is more than one payroll card for every 100 people:

But the lesson of this study is that even if your paycheck is being paid straight onto your card, you’re still not going to use your card like you would a checking account. Most importantly, people just don’t use them for very long: the lifespan of a prepaid card ranges from about 5% to 15% of the lifespan of a typical checking account. If you buy your prepaid card in a shop, you’ll use it for about two months; if you’re given it by an employer, you’re likely to have it for about four months. Which implies that either these jobs tend to be very short-lived, or else that once someone has had a job for four months, they’re likely to get around to opening a bank account.

Or, to put it another way, there’s no evidence here that people are “moving their money” from bank accounts to prepaid debit cards; if anything, it looks like once you start moving decent amounts of money, you graduate from prepaid debit cards to a checking account. Which is probably as it should be, assuming you choose a good bank or credit union which doesn’t rip you off.

If you add up the dollar volume of purchases made on prepaid cards over the card’s lifetime, the sums you get to tend to be very small: the median purchase volume starts at around $25, and peaks around $1,000. That’s not the size of the median purchase, mind: that’s the median size of all purchases on any given card combined.

And when it comes to putting cash onto the cards, or taking it out via an ATM, the transactions tend to be much less frequent than they would be with a checking account, for the very good reason that you generally have to pay for each such transaction. In fact, fees for withdrawing cash from ATMs are the main way that issuers of prepaid cards make money. As a result, prepaid cards, in practice, turn out in this crucial way to be less convenient than a checking account, which always comes with an ATM card you can at least use fee-free at the bank’s own ATMs.

Here’s the chart showing the fees levied by cards used in payroll programs: as you can see, cardholders spend a very substantial amount of money essentially converting their paycheck into cash. Some things you can do with a debit card, but cash still rules. And if you want to be able to move cash around easily, prepaid debit cards are not your friend.

On average, a prepaid card will cost you about $4.88 per month if you have direct deposit, and about $10.72 a month if you don’t: there’s no way to avoid paying substantial fees for putting money onto your card if you don’t have direct deposit. Those numbers are not enormous, but they’re entirely in line with the sums that entry-level checking accounts charge.

The good news, I think, which isn’t in this paper, is that fees are coming down: the rip-off cards are being recognized for what they are, and cheaper, better cards are replacing them. The bad news, however, is that there’s really no indication at all that prepaid debit cards are really being used as checking-account replacements. It’s still possible: maybe the short life of the cards in this study is a function of people switching from bad cards to good cards. But I suspect we’re still a long way from a card issuer where most people hold the same card for years at a time. Unless you count Simple, of course.

(h/t Finkle)

American Banker’s Maria Aspan has sent a love letter to Jane Thompson today, giving her the “banking innovator of the year award” for her achievements at Walmart:

Jane Thompson is not a banker. But during her nine years running Wal-Mart Stores Inc.’s financial services unit she did more than any single bank or banker in the country to develop and sell affordable financial products to low-income customers.

Annoyingly, Aspan doesn’t go into much detail about what exactly these “affordable financial products” are, or how they compare in price to the alternatives. But there’s one product in particular which she singles out for praise.

In 2007, Wal-Mart introduced the MoneyCard, a prepaid card that customers can fund with their paychecks or cash and use like a traditional debit card, without having an existing checking account. Thompson calls it her favorite product.

This comes as a surprise to me. When the MoneyCard was launched, in 2007, I called it a rip-off. And I’m sad that technical glitches have caused all the comments to be deleted from that post, because there were a lot of them, and they tended towards the very angry. As Stephen Vanderpool writes,

A quick perusal of relevant message boards will yield thousands of Green Dot and WalMart MoneyCard customer complaints. A good chunk of these complaints involve the complete loss of deposited money. People usually don’t respond well when their funds go missing. Another big complaint category is refunds gone wrong. With startling frequency, attempts to return merchandise seem to result in no refunds issued.

Contrast this the scarcity of complaints surrounding the Western Union MoneyWise card. Granted, there are a lot more MoneyCards and Green Dot cards floating around out there, but the difference is disproportionate. This may be due to the apparent absence of Green Dot customer service. People aren’t getting their questions answered or their issues resolved.

It’s worth noting that although Walmart is getting the credit from American Banker, the MoneyCard is actually operated by Green Dot, which was sued in May by Florida AG Pam Bondi for possible deceptive and unfair practices, including failure to disclose fees. And I can’t find much in the way of independent praise for the product. Vanderpool, for one, finds the MoneyWise card to be clearly superior to the MoneyCard, and writes:

The WalMart MoneyCard, developed by Green Dot, charges an activation fee, a monthly fee, and a deposit/reload fee that stand at $3 apiece (direct deposit is free). The ATM fee is $2, and it’s another $1 for a simple balance inquiry. Those are some pretty hefty charges, just for the privilege of carrying the card around.

These fees are also far from transparent: on the web page describing the MoneyCard, for instance, there’s no mention of fees at all. And finding the page with the fees is basically impossible, because there isn’t one. In order to find the fees, you have to bring up the 12,000-word cardholder agreement, which starts off not by listing the fees, but rather by entering into legalese defining the word “Agreement” to refer to “This Cardholder Agreement”.

My opinion hasn’t changed since 2007: I don’t like this card, even though I do like the idea of Walmart banking America’s poor. The company does a good job of banking in Mexico, and it’s sad that it can’t do the same here. But the MoneyCard is not a good alternative to a bank account, or even to other prepaid cards. (It’s significantly worse than, say, the prepaid cards which California uses to distribute its unemployment and disability benefits.) So I find this American Banker article rather odd.

Few people despise paper checks as much as I do. They’re expensive, insecure, anachronistic, and dangerously reliant on the less-than-stellar delivery record of the US Postal Service. Recently, banks in my neighborhood have been swapping out their ATMs with new machines which read checks — something which must be a hugely expensive investment, for them, in a technology which deserves to be killed off with extreme prejudice.

So I’m a great fan of the way in which states including Oregon, South Carolina, and California are doing away with the unemployment check. If you want unemployment benefits, have them directly deposited into your bank account. Or, if you’re unbanked or otherwise don’t want to do things that way, get your unemployment benefits on a prepaid debit card.

Except, it hasn’t quite worked out that way. HuffPo’s Janelle Ross has been all over this — she started with an exposé of the fees associated with the prepaid cards, and followed up with a tough piece about the cozy relationship between South Carolina and Bank of America on this front. And then today, American Banker’s Kate Berry has found something truly evil going on in California:*

The states sell banks exclusive contracts to run their benefit-card programs, giving Bank of America Corp., JPMorgan Chase & Co. and their rivals millions of new customers in one fell swoop. These banks then collect uncapped, higher fees from merchants with every card swipe, often kicking back some profits to the states as part of revenue-sharing agreements. California, for example, has earned $7.7 million from Bank of America since December 2010…

B of A spokesman Jefferson George says it was California’s decision not to offer direct deposit. It takes 24 hours for B of A to transfer funds, he says, adding that further delays are caused by the other banks.

Jill O’Connell, chief of accounting for the California Employment Development Department, says the state did not offer direct deposit to recipients because doing so would have required the state to hire more employees to track the deposits.

This is, simply, bonkers. I have no idea what “hire more employees to track the deposits” means, but if California is getting $7.7 in kickbacks from BofA, it could probably afford to hire a few more employees with that money. It’s a no-brainer that direct deposit is the easiest, cheapest, and most efficient way of getting money from the state to the unemployed. And yet, faced with a first-best option like that, California doesn’t offer it, choosing to take BofA’s $8 million bribe instead. And BofA is laughing: the prepaid debit cards aren’t subject to the Durbin cap on interchange fees, so it can charge merchants through the nose every time one of these cards is used.

As Ross’s stories show, people on unemployment benefits live very stretched, high-stress lives where pennies count. And they simply can’t afford the fees that banks like BofA and US Bank are levying with abandon on some of America’s poorest and neediest. The fact that the states are going along with the banks on this is just gruesome. Check this out:

The state asserts that people who are prudent, timing their withdrawals while adhering to the limits, can secure all of their funds without charge.

“With careful use, South Carolina cardholders can avoid paying any fees,” said Fairwell.

But people who rely on such cards to collect their benefits have a difficult time hewing to polite language when they hear such characterizations.

“That’s bullshit,” said Sandra Gortman, 55, a Columbia resident who says she incurred some $10 in fees within the first weeks of using her card. “Excuse me. But, really, there is no way given the way you have to live when you have very, very little money and copious amounts of stress, to avoid paying fees.”

I’m sure the banks have been buttering the states up nicely. But let’s hope the Consumer Financial Protection Bureau, or someone, steps in and brings some common sense to bear. Because right now those who can least afford debit-card fees are being essentially forced to incur them. And there’s absolutely no reason why people getting unemployment benefits should have to worry all the time about debit-card fees and how to avoid them. Especially not when they already have bank accounts which their money could be going into directly.

*Update: Berry’s piece has now disappeared, to be replaced by a placeholder saying only that “an updated version of this story will appear soon.” The state of California says that Berry’s original piece contained errors, and specifically that California does offer direct deposit, just not with the first payment. It’s all a bit confusing; I’m looking into it.

Update 2: Here’s my exchange with someone from California’s EDD. In brief, they do offer a direct deposit option, though one has to get a debit card anyway, and they do not go so far encourage people with bank accounts to use direct deposit.