Debit cards to replace welfare cheques
Posted on August 10, 2011 in Social Security Delivery System
Source: Toronto Star — Authors: Daniel Dale
TheStar.com – news
Published On Mon Aug 08 2011. Daniel Dale, Urban Affairs Reporter
Toronto will soon become the first major Canadian city to permanently replace the iconic welfare cheque with a debit card, a move that will produce savings for both Ontario Works recipients and a government that is itself scrounging for cash.
About 65,000 of Toronto’s recipients receive their payments via direct bank deposit. Many of the 35,000 who receive cheques do not have bank accounts, and many cash the cheques at payday lending outlets that charge high fees they can scarcely afford.
Money Mart, for example, charges $2.99 per cheque plus 3 per cent of the cheque total. That amounts to $249 per year for a recipient who is single, $403 for a childless couple.
“Last year, we did the tax returns for about a thousand people. Their average income was $11,000,” said Diane Dyson, director of research and public policy at Woodgreen Community Services. “Even saving a couple of dollars on the transaction fees — those small differences make a big difference.”
The cards, to be distributed in the fall or winter, will be reloaded monthly. Recipients will be able to use them to withdraw cash at ATMs and to make electronic payments at point-of-sale terminals.
The switch from paper to plastic will save the city $1 million to $2.5 million per year, said Toronto Employment and Social Services general manager Heather MacVicar.
“It’s better all the way around,” MacVicar said. “It’s easier for the residents than trying to deal with the cheque, and it’s a much more streamlined process administratively for the city.”
The city may not force “certain” recipients to convert to cards, MacVicar said, but its goal is to have all or almost all recipients make the switch.
Welfare cards have been adopted successfully by several U.S. states, including New York, California and Michigan. Recipients of U.S. federal payments are required to switch to direct deposit or cards by 2013.
But cards have occasionally been the subject of controversy. State and federal politicians havesought to prevent recipients from using them at casinos, liquor stores and tattoo parlours, among other places. Advocates for the poor, in turn, have argued that governments should not use the cards to try to engineer social behaviour.
There is no indication to date that Toronto politicians are interested in imposing restrictions.
“I’ve been hearing people gripe for years — ‘People get a welfare cheque, and the first thing they do is go to the liquor store, the beer store.’ Well, usually when I get my paycheque, one of the first things I do is go to the liquor store or beer store,” said government management committee chair Councillor Paul Ainslie, a right-leaning ally of Mayor Rob Ford.
“You should have some enjoyment in life. I think it’s a little draconian to start saying, ‘You’re on welfare, and this is exactly how you’re going to spend the money we give you.’”
The cards will be designed so that its users cannot be easily identified as welfare recipients. Other details, such as whether withdrawals will be subject to ATM fees, are still to be determined.
The cards will eliminate cheque fraud. They will also reduce the stigma associated with cashing a government cheque, Dyson said, and make recipients safer: they will no longer have to carry large amounts of cash, and the PIN-protected cards can be quickly cancelled if they are lost or stolen.
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