Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 14, 1993 TAG: 9303140081
SECTION: NATIONAL/INTERNATIONAL PAGE: A-4 EDITION: METRO
SOURCE: The New York Times
DATELINE: BALTIMORE LENGTH: Medium
WELFARE SYSTEM TESTS CASH CARDS
When Donnie Delrio goes to the supermarket here, she no longer takes food stamps or cash from her monthly welfare payments. She carries plastic instead.As a result, she said, she no longer feels the stigma of fumbling with food stamps at the checkout counter, and she can go home with less fear of being mugged for cash or stamps.
As the clerk at a Super Pride market here rang up a week's worth of groceries on a recent morning, Delrio reached into her purse and pulled out a plastic card to pay the $87.96 total. She ran her card through a card-reader, punched in her personal identification number on a keypad, and got a receipt for her purchase that also showed the balance in her account.
To all outward appearances, it worked like an ordinary bank card, the kind that millions of Americans use at teller machines around the country. And as more and more stores install machines that read magnetic-stripe cards at check-out counters, a growing number of shoppers are using their bank cards as debit cards: their purchases are paid for with immediate deductions from their bank accounts.
Delrio can use her card just as bank customers use theirs: as a debit card at stores and as a cash card at automatic tellers. The only difference is that her "bank" is the state government. She is one of 125,000 welfare recipients in Maryland - 85 percent of those enrolled in the state's welfare program - who take part in the Electronic Benefit Transfer System.
Delrio's monthly payments of $359 in Aid to Families with Dependent Children and $201 in food stamps, once mailed to her in the form of a check and paper coupons, are now held in a central account replenished by the state government every month.
Six other states are testing similar systems to distribute a variety of government benefits, including welfare checks, food stamps and child support. Twenty-four other states, including New Jersey, have submitted applications to the federal government for permission to turn paper checks and food stamps into computer chips and plastic debit cards by the end of the decade.
Advocates for the poor say that while welfare recipients generally prefer the electronic system to the paper one, structural and technical problems remain, in part because of state administrators' fears about fraud.
In addition, Barbara Leyser of the Center for Social Welfare Policy and Law, an advocacy group based in Washington, said that having welfare checks mailed is often more convenient for the elderly, the disabled and people in rural areas where automatic teller machines are scarce.
And some state welfare administrators oppose a recommendation made in January by the Federal Reserve Board that users of welfare cards receive the protections against fraud and theft enjoyed by bank customers. Such protection would sharply increase administrative costs, some officials say, because states, like banks, would be held liable for more than $50 of money lost or stolen from accounts. The board gave the public, retailers and welfare administrators 90 days to respond to their recommendation.
Consumer advocates argue that the poor should enjoy the same protections as everyone else, and that there are no data to support fear of fraud.
The states and the advocates agree that the cards carry real advantages. They save money by reducing paperwork and mailing costs, and they actually cut welfare fraud. For example, food stamps can no longer be sold on the black market, and checks are not lost in the mail or stolen.
More important, a debit-card system frees welfare recipients from their dependence on businesses that charge high fees to cash welfare checks. For people who do not have bank accounts, the system has also offered a degree of financial security and promoted a sense of financial responsibility.
"Now I have a way of managing and budgeting more carefully," said Delrio, who withdraws cash about three times a month, taking only what she needs and knowing that the rest is safe. Before, she said, she felt compelled to use all of her food stamps at once because she was afraid of losing them.