Nebraska’s Prepaid Debit Card Praised in Washington, D.C.

The innovative use of prepaid debit cards by the Nebraska Child Support Payment Center, a division of the Nebraska State Treasurer’s Office, was highlighted in Washington, D.C., this week at a panel discussion hosted by the Hudson Institute, a nonpartisan policy research organization.

“Using technology to reduce costs to the taxpayer continues to be a high priority for all of the divisions of the State Treasurer’s Office. We are proud of the national recognition we received for these efforts,” State Treasurer Don Stenberg said. “The prepaid cards have been an excellent way to cut state program expenses and streamline government operations while still delivering services to constituents,” he said.

Troy Reiners, director of the Nebraska Child Support Payment Center, told the Hudson Institute panel Wednesday that 97 percent of all disbursements from the center are now done electronically, either by direct deposit or prepaid debit cards. Since the center introduced electronic payments, the cost of paper, printing, and postage has been reduced from $385,000 in 2003 to $26,700 in 2010, despite an increase in the number of payments disbursed.

In December 2010, almost 59 percent of all child support payments in Nebraska were made through direct deposit, almost 38 percent through prepaid debit cards, and only 3 percent by check, Reiners said. Electronic disbursement was mandated in 2007 by regulations adopted by the State Department of Health and Human Services, but individual exemptions are allowed.

“If the federal government is going somewhere with trying to get people who get paper checks to move to other payment modalities, Nebraska is already there,” said Hanns Kuttner, the Hudson Institute’s visiting fellow who authored the paper, “When the Check is No Longer in the Mail: The Move to Digital Payment.” Nebraska’s reliance on prepaid debit cards for child support payments was used as a case study in the panel discussion, which was webcast from Washington.

The Hudson Institute noted that new beneficiaries of federal government programs, such as Social Security and veterans’ disability payments, will be required to receive payments electronically, as of May 1. By 2013 all 9 million federal beneficiaries will have made the switch to either direct deposit or debit cards. “The paper check is well on its way to becoming an obsolete technology for moving money from government to citizens,” the institute said.

In Nebraska, “you have seen the future,” Kuttner told panel participants. “The federal government is trying to catch up with Nebraska as far as getting the checks out of the mail stream.”

Nebraska should be recognized for its forward-thinking approach to using prepaid debit cards not only by the Child Support Payment Center, but by a variety of state agencies and institutions, Reiners said. Prepaid debit cards also are used for the State of Nebraska payroll, the University of Nebraska payroll, and the Nebraska State Colleges payroll and by the following agencies and institutions: Department of Health and Human Services, Department of Labor, Department of Corrections, and University of Nebraska athletic stipends. The Nebraska Public Employees Retirement is scheduled to begin using prepaid debit cards in July.

Michelle Raphael, director of the Treasury Management division of the State Treasurer’s Office, said Nebraska’s accomplishment is not necessarily in the volume of cards issued, but in the diversity of agencies and institutions offering the cards as alternatives to more traditional banking options. With Nebraska’s prepaid debit card program, the state loads the funds into a bank account and the consumer accesses the account using a Visa prepaid card. The card can be used at retailers and ATM machines, over the Internet, or for bank teller cash advances. The program is operated by the various state agencies under a contract with the Nebraska State Treasurer’s Office and the prepaid vendor, US Bank.

“Prepaid debit cards are a great way to provide banking services to people without access to traditional banking services or people who have no banking services,” said Raphael. In particular, the cards are helpful for people who may not have credit, or don’t have money in the bank, or are unable to keep a required minimum bank balance. The cards are also popular with people who receive payments through the state, such as child support, and live or travel internationally.

“The state has found many ways to use prepaid cards to deliver payments to customers electronically,” Raphael said. “The prepaid card program allows cardholders additional banking services with little or no fees, depending on how the cards are used and what services cardholders select. Cardholders receive marketing materials that are geared towards educating them on options that can avoid or lessen fees. Cardholders are not charged monthly or statement fees,” Raphael said.

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