Originally published on Forbes.com.
It’s like the old light bulb jokes. How many public companies do you need to hand out a few billion dollars to a few million people?
Yesterday I told you about my friend who thought their Economic Impact Payment was likely either junk mail or some sort of scam. It turns out that if we had been reading Kelly Erb regularly we wouldn’t have been so mystified. She had let people know about it back on May 19 and had followed up on May 27 with “Don’t Mistake Your Stimulus Check (Or Debit Card) For Junk Mail”. I figured it out from checking irs.gov.
Who Is Running This Thing?
But as I looked into things further, I started having more questions. This whole thing seems so well, you know, Republican. They can’t even hand out free money without cutting a couple of public companies in on a piece of the action.
The VISAV debit card that will be going to roughly four million economically impacted Americans will be managed by Money Network. Money Network LLC is a wholly-owned subsidiary of FiservFISV which trades on NASDAQNDAQ. Jeffrey Yabuki, President and CEO of Fiserv has total compensation of $27,601,000
Then there a bank involved. I think that has to do with how VISA works, but I’m not going to go down that rabbit hole right now. The bank is MetaBank which is a wholly owned subsidiary of Meta Financial Group. Like Fiserv, Meta Financial Group trades on NASDAQ. President Brad Hanson manages to squeak by on a measly $4,155,520 according to Wallmine.
It’s A Bush Thing
As I dug into this a little further I found that handing out federal benefit payments via bank debit cards does have apparent Republican roots, but it is not a Trump administration innovation. It is called Direct Express.
“The Direct Express® Debit MasterCardMA® card – issued by Comerica BankCMA as the Treasury Department’s financial agent – is a prepaid debit card and electronic payment option for federal benefits. The card is a Treasury-recommended, safe, convenient alternative to paper checks.”
Comerica Bank is traded on the New York Stock Exchange. President and CEO Curtis C Farmer had compensation of $4,833,672.
The Direct Express program began to roll out in June 2008, late in the second term of the second Bush administration. According to this story by Kate Berry in American Banker Comerica was renewed by Treasury for the second time earlier this year in sprite of criticism of the program by the Treasury Inspector General.
Direct Express
People who are receiving federal pensions of various sorts, veterans benefits and social security can sign up for Direct Express. It seems like a better deal than going to a check cashing service, but a bank account and a credit card seem better. Unless you can’t handle the credit card responsibly. Direct Express is mostly free but not entirely.
With Direct Express, you can draw cash for free after each deposit but it is $0.85 a pop after that. It is $0.75 per month for paper statements. There is something called “Cardless Benefit Access” but at $8.50 to $12.00 per transaction I would stay away from that. It costs $1.50 to transfer money to a bank account. You get one free card replacement per year and then it is $4.00 after that. If you need the card in a hurry it is an extra $13.50. ATM withdrawals outside the US are $3.00 plus 3% and purchases outside the US cost 3%.
For what it is worth, according to this CBS Chicago story payees have significant problems with Direct Express.
EIP Card
The EIP card is also mostly free. In-network ATM withdrawals are free. One out- of-network withdrawal is free and they are $2.00 after that. ATM international withdrawals are $3.00. ATM balance inquiries cost $0.25. First replacement card is free and it is $7.50 after that. Expedited replacement is $17.00. Bank teller over the counter withdrawal is free for the first and $5.00 after that.
Now if you are somebody who just got an EIP card you might wonder why you have to pay more for the second card replacement than a Direct Express cardholder. I can’t figure it out, but the DE cardholder is likely a veteran or a senior citizen (or maybe both), so you should not feel bad about it. Thank them for their service or congratulate them for having lived so long and carry on.
What Is In It For The Companies?
I have not figured that out yet. Back in the day, I would think the float would have been a really big deal, but interest rates are extremely low now. I’m reaching out to people with expertise in banking to help me with that. Presumably the companies get the merchant fees when the cards are used for purchases. That must add up.
Unlike credit cards they don’t have the opportunity to sink people under outrageous interest charges. On the other hand there is no credit risk and the float works against the banks on credit cards when people pay the full balance when it is due. On the third hand, those of us who use credit cards responsibly get all those nifty points for buying stuff. There does not seem to be any of that with Direct Express or the EIP card.
Do We Need Private Companies To Do This?
I tend to think that there are some things that are done best by private businesses and other things that are done best by government. You will find a lot of people who maintain that everything is better run by private enterprise. I tend to think they are speaking more from ideology and anecdote rather than from sharp analysis.
Handing out free money probably does not need help from enterprises that need to pay leadership millions of dollars.