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A leaked document obtained by the BBC has revealed concerns from the Department of Works and Pensions (DWP) in Scotland that some 'pre-paid card' companies are targeting benefit claimants. In Central Scotland, the Clyde and Fife Benefits Delivery Centre received 100 requests from claimants asking for their benefits to be paid onto 'pre-paid cards', despite the fact most claimants were unaware of the high level of administrative charges and fees associated with these cards.
It is understood that companies use stalls in local shopping centres, and have been successful in recruiting customers in, for example, Easterhouse and Castlemilk in Glasgow. An example of these products is the 'Go Card'. It costs £10 to buy and a £7.50 annual management fee is charged after the first month. It costs a minimum of £1.25 and a maximum of £2.50 to have each benefit loaded on to the card and the same charges apply for each cash withdrawal.
GLC's Mike Dailly said:
"Pre-paid cards are wholly unsuitable for anyone on benefits or a low income. They come with a whole host of fees and charges and there is nothing that such products offer which cannot be bettered by a basic bank account or post office account. For example, there are at least eleven basic bank accounts which offer debit card facilities to enable online purchases - all without ATM withdrawal or load-on charges. And basic bank accounts are available to those with a bad credit rating".
"Benefits are designed to provide a 'breadline' standard of living and therefore for anyone to seek to financially target or profit from people living in poverty is disturbing and morally reprehensible. If the rules needs to be changed to prevent the DWP paying benefits to pre-paid cards then the sooner the better as far as Govan Law Centre is concerned".
Listen to Mike discuss this issue with Paul Lewis on BBC Radio 4's MoneyBox. Further dicussion of this issue is available on the BBC's Business pages here. If you need help on basic bank accounts, take a look at the FSA's Money Made Clear leaflet on the range of basic bank accounts available in the UK (opens as a PDF).
i do not agree that the prepaid card is wholly unsuitable for those on benefits or lower incomes. The prepaid card such as the GO: Card and others do have their place and they will become more popular when people understand that they are free to chose were there income is paid and that the present banking system including the Post Office do not meet people’s needs in offering financial inclusion and respect.
ReplyDeleteFirstly - basic bank accounts have been proven time and time again to be difficult to open for those in receipt of benefits or lower incomes. From a banks perspective they do not want those on benefits or lower incomes because, and simply put, they don't make any money. No overdrafts and no loans means no income and the administrative costs are never covered - banks have also been proactive in reducing debit card availability with the removal of solo and the present phasing out of the visa electron. Again these processing systems cost banks and having low income customers with just a basic atm card account only reduces the perceived "burden".
Secondly - the Post Office Card Account (POCA) is woefully inadequate as the main depository of benefits and pensions. It offers no visa or MasterCard functionality so customers are unable to actively participate in the purchasing power and convenience on-line at discounted prices, including the increasingly popular cash back sites. To obtain your money from the POCA you must physically visit a post office and brave the normal queues in all weathers - i counted 128 people on a Monday morning in Liverpool back in October - why isn't the card on the normal networks such as link - answer money!! and the Governmental won’t pay. With Post Offices disappearing ever more frequently this problem will only exacerbate. This is an antiquated second class service and those on benefits deserve greater levels of respect.
The prepaid card is not perfect, I agree but it does offer convenience, flexibility and functionality. It is a solution to the government and banks inability to adequately cater for the growing needs of financially excluded people who lack the access to modern commercial processes the majority of people take for granted. The GO: Card addresses these problems and will no doubt change and evolve accordingly to keep relevant to its customers’ needs. The real costs of using a GO: Card are subjective to each and every customer relating to their needs but were the benefits outweigh these costs the GO: Card will be, and I’m sure is, a god send to many.
I fully understand your views on the radio yesterday but those on benefits and lower incomes deserve more and are prepared to pay for convenience, flexibility and respect. Do you walk 2 mins to a local convenience store to buy teabags at 50p more than your local asda or do you drive to the asda. It's your choice. Does a single mum with two toddlers pay for a return taxi and an hour shopping with all it entails or simply book your food and have a van deliver? Choice.