Watch Out for Junk Fees!

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According to this article and a new study by the National Consumer Law Center, many states are shortchanging the jobless by distributing unemployment benefits on debit cards loaded with junk fees. Of the 40 states that have switched from paper checks to prepaid debit cards, 22 states’ cards charge ATM fees, 24 charge balance inquiry fees, and 28 charge inactivity fees. The cards in Arkansas, Idaho, Nebraska, Ohio, and Oregon come with overdraft fees ranging from $10 to $20.

Questions:

1.  According to the article, which bank issued cards are the best?  Which state has the most junk fees?

2. Why do the cards have the fee?  In other words, what is the process for setting up the card structure? How would you consider improving the process?

3.  Discuss the justification for these junk fees.  Do you agree or disagree?

4.  How would these fees be recorded in the accounting records of the banks?

 Source:

Delaney, A. (2011). States Shortchange the Unemployed With Junk Debit Card Fees: Study, The Huffington Post – Business, May 12 (Retrievable online at http://www.huffingtonpost.com/2011/05/11/states-shortchange-the-un_n_860606.html)