Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
Guess what? Starting next year, Social Security recipients as well as those receiving veterans’ benefits, railroad pensions, and federal disability payments will no longer receive physical checks sent through the mail. Instead, the government will only issue electronic payments.
In general, this means direct deposit to a bank account, though debit cards will be available for the unbanked. For the time being, tax refunds will be exempt from this requirement, though the IRS has been pushing direct deposit for quite some time.
As it turns out, 90% of these payments are already made electronically, but still… Making the remaining 10% of these payments (7.3M per month) represents should save the feds a significant chunk of change.
The changeover is expected to be complete by March 2013, at which point the USPS will have even less business (and greater losses) than it does right now.
All in all, I see this move as a good thing. It’s significantly cheaper — the estimated cost savings is $120M/year — and avoids the possibility of checks being lost or stolen. The primary downside is for those without bank accounts, as they could wind up facing ATM fees to access the money on their debit cards.
What do you think? Is this a good move?
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