The Future of Social Security Disability Payments

Since May 1, 2011, paper checks have no longer been used to distribute funds to new recipients of Social Security Disability benefits.

Rather than the traditional check which arrived via the regular mail each month the U.S. Department of Treasury has instead chosen to rely on electronic method for getting the money to the people who need it most. People receiving Social Security Disability payments will be able to choose to have their payments deposited directly into a bank account or credit union account. Or they can receive their payment directly to a Direct Express Debit Mastercard.

All new accounts will be automatically sent via direct deposit after March of this year. People who have already been receiving Social Security Disability checks in the mail will be required to switch by March 1, 2013. If they do not switch voluntarily to a direct deposit method their payments will be automatically switched to the debit card method.

Electronic Social Security Disability payments will save the U.S. Treasury money

The U.S. Treasury Department has estimated that switching to an electronic system for releasing Social Security Disability payments the government can save more than $1 billion in the next decade.

With the Social Security system straining under the weight of an ever growing aging population in need of care, this move could help relieve some of that strain.

Why some Social Security Disability recipients are not fond of the switch

The automatic electronic payment system has been available for years but many recipients of Social Security Disability benefits have been reluctant or unable to use it. Many are afraid the move will cause an interruption in their regular payments, or lead to some sort of electronic error which will cost them money.

Another problem with switching people to the electronic method of receiving Social Security Disability payments is the fact some recipients of payments do not fully understand how bank accounts or debit cards work and are therefore more likely to incur fees, service charges and penalties.

Electronic Social Security Disability payments are safe

The reality is that there are safety advantages for both direct deposit and debit cards. To start with, by not using a paper check delivered through the mail there is no chance the payment will become lost or damaged while being delivered. Another big advantage with electronic payments is that every Social Security Disability payment, whether it is made to a debit card or transferred directly to a bank or credit union account, is fully insured by the Federal Deposit Insurance Corp. So, if there is a problem, your payment is covered. No worry that the bank or finance company will fail and take your payment with them. Recipients rely on these monthly payments and need to know the payments will be there.

Some recipients of Social Security Disability payments also fear that by receiving an electronic payment they are more likely to lose their money to creditors. However in most cases this is highly unlikely. First of all, federal law strictly prohibits creditors from taking any Social Security benefits directly from a recipient’s bank account or from putting a hold on their debit card. The only exceptions to this rule allow for the deduction of court ordered outstanding child support or alimony payments. As a further precaution the U.S. Treasury also intends to add rules which will protect federal benefit payments from garnishment once they have been electronically deposited.

Not everyone has a bank account, but they have options

Unfortunately, beyond the safety of electronic Social Security Disability payments, a much larger problem is that more than 7 percent of U.S. households, or about 17 million adults, currently do not use a bank of any kind. So, regardless of the safety of electronic transfers, they will not a have an account for transferring to. To reach these recipients the U.S. Treasury is offering the debit card option. With the debit card there is no cost to sign up, no monthly maintenance fees, no additional costs for using the card to make purchases at the store and one free ATM withdrawal for each deposit made to the card. Also, banks or credit unions which display the Mastercard logo must provide cash back to debit card holders without charging a surcharge. There is the potential for the debit card users to incur some fees when they request cash back from purchases or from some banks. There is also a fee to use ATMs outside the Direct Express Network, fees for purchases made outside the United States, a 75 cent charge for a mailed monthly statement and a 50 cent charge for electronic bill payment.

Do your homework before you decide how you want to receive your Social Security Disability payments

Social Security Disability recipients are strongly encouraged to do their homework before deciding which option is best for them. There are numerous free checking account offers from banks around the nation, so maybe that choice is best for them, or perhaps the debit card option is simpler and more manageable. Only the recipient knows for sure which option will suit them best, giving them the fastest and easiest access to the money they need and rely on every month.