Unemployment benefits prepaid cards provide recipients with a faster, more reliable way to receive funds without waiting for and cashing paper checks. During a period of unprecedented unemployment, however, the experience in New York demonstrates that electronic distribution does not necessarily eliminate every obstacle to accessing money.
For some recipients, ATM withdrawal limits and fees make it difficult to obtain enough cash for major expenses such as rent. The result is an unexpected bottleneck: long lines at a single KeyBank ATM in New York City where unemployment benefits prepaid card users can withdraw larger amounts without incurring additional fees.
The State of New York provides unemployment benefit recipients with a prepaid card so they can receive their funds automatically, on time through an electronic deposit and without the need to cash a check. While a fantastic solution, some recipients have a hard time using the balance unless they first get cash. This is creating long lines at a particular ATM in Manhattan that allows for large withdrawals for free. Consumers can go to other financial institutions to get a free withdrawal, but they often don’t allow a withdrawal that is large enough for a New York City sized rent payment. With so many more individuals receiving unemployment benefits, this is creating a long line for one particular ATM. Details were reported in the New York Times:
The line started small about two months ago with a handful of people who had recently been laid off. But now, nearly three months into the economic crisis, which has claimed more than 40 million jobs nationwide, it stretches 50 or 60 people long throughout the day and down almost an entire Manhattan block.
They are all waiting to access the same thing: the lone A.T.M. inside the only New York City branch for KeyBank, a regional Ohio bank in charge of distributing unemployment benefits to out-of-work New Yorkers.
The people in line at the bank are a cross-section of the city’s economy and represent its most vulnerable workers — janitors, bartenders, school bus drivers, deliverers — who struggled to survive even during normal times with low-paying jobs. Some brought their children, others used walkers to move around and most traveled there from outside Manhattan.
People getting unemployment benefits have another option to avoid fees, which can range from $1.50 to $3 per transaction, by using the card at other A.T.M.s in the Allpoint network, which has 1,000 locations in New York City, including a handful within walking distance of the KeyBank branch.
Those A.T.M.s have smaller withdrawal limits per transaction, usually around $200 to $400, though they can be used consecutively every day until $1,500 is taken out, a KeyBank spokeswoman, Kimberly Kowalski, said.
The situation highlights an important distinction between receiving unemployment benefits electronically and being able to use those funds conveniently. A prepaid card may eliminate the delays and costs associated with paper checks, but consumers who depend on cash can still encounter barriers created by ATM withdrawal limits, network availability, and transaction fees.
Those challenges become particularly significant when recipients need to make large payments such as New York City rent. Although alternative ATMs provide fee-free access, lower withdrawal limits can require consumers to make multiple transactions over several days.
As unemployment claims remain elevated, benefit programs and their financial partners should consider the entire experience of accessing funds. Unemployment benefits prepaid cards can provide an efficient distribution method, but convenient and affordable access to the money is equally important for the consumers who depend on it.
Overview provided by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.
