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Paper Social Security checks will soon be retired

The Savy Senior

Jim Miller - Savy Senior

(Updated: Thursday, July 29, 2010, 12:00 AM)

How to handle the changes

Dear Savvy Senior,

I've heard that the government is about to do away with paper Social Security checks and make direct deposit mandatory. Is this true? I've always liked getting my retirement checks in the mail. Besides, I don't have a bank account for direct deposit.

What can you tell me?

-- Concerned Senior

Dear Concerned,

It is true! Paper Social Security checks will soon be completely retired and replaced with electronic payments. Here's what you should know.

Mandatory E-payments: In an effort to save money, the U.S. Department of the Treasury recently announced that beginning March 1, 2011, all new enrollees for Social Security, Supplemental Security Income, veterans, railroad retirement, and federal civil servant retirement benefits will be required to receive their payments by direct deposit either into a bank account or a Direct Express Debit MasterCard. And existing beneficiaries, who currently receive their government benefits via paper check, will have until March 1, 2013, to switch to electronic payments.

About 85% of federal benefit recipients already receive their payments electronically. Switching all beneficiaries to paperless payments is expected to save the government around $300 million in the first five years and $125 million each following year. It costs $1 overall to cut and mail a check but only 10 cents for a direct deposit. The Treasury issues about 135 million benefit checks annually.

Government Debit Card: If you don't want your government benefits direct deposited in your bank account, or if you don't have a bank account that your payments can be deposited into, you'll need to get a Direct Express Debit MasterCard.

This is a prepaid debit card that was introduced by the Treasury Department in 2008 as an alternative to the 10 million or so Americans who still get a paper Social Security check each month.

How it Works: With a Direct Express Debit MasterCard, your Social Security and/or other government benefits will automatically be deposited to your card's account on your payment day each month.

Your card can then be used to get cash from ATMs, pay bills online and over the phone, make purchases at stores or locations that accept Debit MasterCard and get cash back when you make those purchases, and purchase money orders at the U.S. Post Office.

The money you spend or withdraw is automatically deducted from your account.

You also need to know that there's no cost to sign up for the card, no monthly fees, and no credit check required to enroll. There are, however, a few small fees for optional services you need to be aware of, like multiple ATM withdrawals.

Currently, cardholders get one free ATM withdrawal per month, but additional monthly withdrawals cost 90 cents each not including a surcharge if you use a non-network ATM.

Another important feature is security. Your card is PIN-protected, the money in your account is FDIC-insured, and if the card gets lost or stolen it will be replaced with consumer protections if it's reported promptly.

How to Sign Up: To learn more about the Direct Express Debit MasterCard program or to sign up, visit usdirectexpress.com or call 877-212-9991.

To sign up for Social Security direct deposit, call 800-772-1213 or go to ssa.gov/deposit.

Also see Go Direct (godirect.org, 800-333-1795), a national campaign sponsored by the U.S. Treasury Department and the Federal Reserve Banks that provides information on direct deposit and a variety of easy, safe ways to sign up.

Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit SavvySenior.org. Jim Miller is a contributor to the NBC Today show and author of "The Savvy Senior" book.