A check with President Trump’s signature would have been easier to cash

Some taxpayers are getting their coronavirus stimulus in a pre-paid debit card that carries fees and limitations. (Photo via MetaBank)

My husband and I were surprised a few days ago to receive our coronavirus stimulus payment in the form of a pre-paid debit card. We’d somehow missed the news that the IRS was sending these cards to some taxpayers instead of traditional checks.

My husband was instantly suspicious.  “It looks like a scam,” he said.

So, I did some quick research.  Indeed, the federal government was using  a private vendor, MetaBank, to deliver Economic Impact Payments (EIP).  This is money approved through the CARES Act, intended to deliver a direct payment of $1,200 to most taxpayers, depending on income.

Here’s what Treasury Secretary Steven Mnuchin says about the program on the department’s website: “Treasury and the IRS have been working with unprecedented speed to issue Economic Impact Payments to American families. Prepaid debit cards are secure, easy to use, and allow us to deliver Americans their money quickly. Recipients can immediately activate and use the cards safely.”

I wonder how many taxpayers will also smell a rat and discard this new credit card they hadn’t ordered. (Don’t do that; it’s expensive to replace a lost card.)

There had been some controversy a month or so back with the news that President Trump wanted his signature on all the stimulus checks.  Frankly, a paper check with President Trump’s signature would have been far preferable to this debit card, which came with a dense instruction sheet full of small print and a barely navigable website with even more unpleasant surprises.

There was a list of a half-dozen ways the company could charge fees.  For example, you can use the card in an ATM for free, but only if it’s an “in-network” machine.  The “ATM finder” on the website shows a number of these approved machines in the Des Moines metro area but nowhere else in the state. If you use an ATM that’s not “in network,” all transactions after your first one will cost $2 per withdrawal. All withdrawals on international ATMs cost $3.

If you use any ATM to check your balance, it’ll cost you 25 cents.  Lose your card and it’ll cost you $7.50 to replace it and more if you put a rush on it.

Want to skip the machine and have a bank teller withdraw the money for you?  Fine, but if you do that more than once, it’ll cost $5 per transaction.

And there will be more than one transaction, guaranteed.  That’s because you can’t withdraw more than $1,000 per day from an ATM.  If you choose to transfer the card balance to your bank account, you can only transfer $1,000 in a calendar month. I found that out after being repeatedly dumped out of the user-unfriendly website when I tried, unsuccessfully, to withdraw the entire balance through an ACH transfer. If our health care system wasn’t overburdened before, it will be after millions of taxpayers see their blood pressure shoot through the roof while trying to access their money.

So a married couple who received the full $2,400 would have to make three separate transactions over a three-month period if they simply wanted to transfer the balance to their checking accounts.

Point-of-sale transactions are limited to $2,500 per transaction and per day (so if you decide to spend your whole stimulus payment in one place, you can do that.)  If you use the card to go shopping, however, you’ll have to remember your PIN number, which you set when you activate the card.

Presumably, this is how MetaBank is making a buck.  It gets to earn interest and transaction fees while we taxpayers have to wait to access our money.  I think my husband was right in his initial impression of this program.

I asked Sen. Chuck Grassley’s office about the program, including how much MetaBank was making off this program.  They hadn’t seen the terms and fees for the debit cards, even though Grassley chairs the Senate Finance Committee.

Grassley’s spokesman, Michael Zona, didn’t comment on what the vendor will be making. But he defended the fees, saying they were unlikely to affect most taxpayers.

“While there appear to be some fees associated with some transactions with the debit cards (which are subject to disclosure like any other debit card), such as using an out-of-network ATM more than once, there also appear to be many types of transactions that have no fees associated with them,” he said, such as getting cash back with point-of-sale transactions and online purchases.

He said the daily limit on point-of-sale transactions is “an anti-fraud measure that is common with debit cards. Very few people would likely be inconvenienced by this,” he said.

“Additionally, these fees should be much lower than fees associated with cashing an Economic Impact Payment received as a check by someone without a bank account,” Zona said.  He has a point there, but why should there be any fees associated with taxpayers getting money back from the government?

Zona pointed out that the reason for sending out debit cards as well as paper checks is to get money to taxpayers as quickly as possible. “The IRS is using a bank called Metabank for the debit cards because that bank provides debit cards to Americans for other government payments already, and this pre-existing relationship makes it easier to get the money out to Americans faster,” he said.

I would submit, though, that if it takes a month or two to get the entire balance into my checking account, it is not faster than cashing a paper check.

It may be too late this time, but save yourself some hassle for the future:  Sign up for direct deposit with the IRS. If somebody is profiting off this coronavirus program, chances are good this will be how you’ll get your tax refunds in the future.