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E-payments rapidly phasing out paper checks as an option By Sandra Block, USA TODAY Likewise, some people would rather not venture into the shadowy world of direct deposit and other types of electronic transactions. Alarmed by tales of unshaven hackers with nefarious intentions, they're more comfortable writing and receiving tangible paper checks. Increasingly, though, even traditionalists will have no choice but to accept electronic payments for everything from retirement benefits to tax refunds. Who will be affected: •Savings Bond investors. For the first time in 76 years, you can no longer purchase paper Savings Bonds from a bank or credit union. As of Jan. 1, Savings Bonds are sold exclusively through TreasuryDirect, a Web-based program offered by the Treasury Department. It estimates that the shift to electronic bonds will save taxpayers $120 million over five years. Investors who own paper Savings Bonds will still be able to redeem them at banks and credit unions. For more information, go to TreasuryDirect.gov. •Retirees. If you sign up for Social Security benefits this year, you'll be required to arrange for direct deposit of your payments. Social Security eliminated paper checks for new beneficiaries in May 2011, and plans to phase out paper checks for all beneficiaries by 2013. Currently, about 85% of Social Security beneficiaries receive their payments through direct deposit. Still, the government issues more than 120 million checks a year, at a cost of about $1 each, vs. 10 cents for an electronic payment. Retirees who don't have bank accounts can have benefits deposited to a prepaid card issued by Treasury and Comerica Bank. For more information, go to http://www.godirect.org/. Straight to the bank •Taxpayers who get a refund. This year, Louisiana residents who don't sign up for direct deposit of their tax refund will get their money on a prepaid debit card instead of a check. Taxpayers who still want a check must request one from the state Department of Revenue. The change will affect both paper filers and e-filers. The department of revenue estimates that change will save the state $500,000 a year, spokesman Byron Henderson says. New York and Georgia are also offering prepaid cards for residents who are eligible for tax refunds, although residents will still have the option of receiving a paper check. The Treasury Department tested a similar program for federal tax refunds last year, offering prepaid cards to 800,000 low- and middle-income taxpayers. The program was targeted at taxpayers who were unable to sign up for direct deposit because they didn't have traditional bank accounts. The results weren't encouraging: Only about 2,000 taxpayers signed up, Treasury spokesman Matt Anderson says. Treasury doesn't plan to offer the program again this year but hasn't ruled out doing it in the future, he says. Benefits of direct deposit While change is difficult, there are good reasons to embrace electronic payments. Among them: •It's faster. In an effort to remain solvent, the U.S. Postal Service plans to close half its 487 processing centers sometime this year. That means it will take longer to receive first-class mail. While you may not mind waiting an extra day for the invitation to your nephew's wedding, the slowdown could present real problems if Social Security is your main source of income, or you need your tax refund to pay the mortgage. Direct deposit puts the money in your bank account on the day the payment is made. •It's safer. For all the furor about hackers, a lot of identify theft is old school. Mailboxes containing government checks are prime targets for low-tech thieves looking for personal financial information to sell. Electronic payments are sent directly to your bank account or a prepaid card, so there's no risk of lost or stolen checks. •It's cheaper. Retirees and taxpayers who don't have bank accounts usually have to pay a fee to a check-cashing store or pawn shop to cash their checks. State and federal prepaid cards charge fees, too, but they're easily avoidable. For example, retirees who receive their Social Security benefits on Treasury's Direct Express card can get cash-free withdrawals through bank or credit union tellers, or by withdrawing money from more than 50,000 surcharge-free ATMs. Sandra Block covers personal finance for USA TODAY. Her Your Money column appears Tuesdays. E-mail her at: sblock@usatoday.com. Follow on Twitter: www.twitter.com/sandyblock. See an index of Block's columns. |