Beware, The cashless society

By Dave Skidmore

Associated Press

Friday, November 20, 1998; Page A27

The Treasury Department is encouraging banks, savings institutions and credit unions to voluntarily set up low-cost accounts for federal beneficiaries who don't have checking or savings accounts.

The accounts would be available to anyone who receives a federal benefit, salary or retirement payment, including Social Security, via electronic transfer.

Under a proposed notice that officials expect to be published Monday, financial institutions could charge no more than $3 a month for the accounts and must permit at least four withdrawals a month, either from tellers or automated teller machines.

There would be no minimum balance and account-holders would receive monthly statements. They also would be able to use account cards to make point-of-sale purchases at grocery stores, gasoline stations and other retail outlets.

Treasury proposes to reimburse the financial institutions $12.60 for each account for the one-time cost of setting it up.

The federal notice proposing a format for the new accounts is part of a government program to eliminate as many paper checks as possible. Final regulations published in September and effective Jan. 2 encourage, but don't require, federal payment recipients to use a direct-deposit system. Without some type of account at a financial institution, they cannot.

The government issues about 860 million payments a year, not including income-tax refunds. In the fiscal year that ended Sept. 30, 63 percent were made by electronic transfer.

Treasury officials argue that the new accounts, by permitting four withdrawals and point-of-sale purchases, would be safer for recipients than cashing their monthly check all at once. They also should be cheaper because check-cashing outlets typically charge a 1 percent fee for cashing government checks.

In addition to the proposed rules for the accounts, the Treasury Department is seeking comment on whether the low-cost, electronic-transfer accounts should pay interest, accept additional deposits and provide for electronic payment of bills, such as for utilities.

Officials hope by spring to issue final regulations and begin contracting with financial institutions that want to offer the accounts.

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