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Kansas Welfare Bill Would Cut Into Benefits With ATM Fees

Both houses of the Kansas legislature have passed a new welfare bill that places severe constraints on how its poorest citizens can use their benefits. If Gov. Brownback signs the bill, as he is expected to do, the law will go into effect July 1. The bill prohibits welfare recipients from using their electronic benefit cards to buy alcohol, cigarettes or concert tickets. But its most unusual feature — one that could make a big difference in the financial lives of welfare recipients — is a $25 limit on the amount of cash they can withdraw from an ATM each day.

The cap is intended to prevent recipients from getting around the limits on banned purchases, but it could wind up imposing hefty fees on people who would have trouble affording them.

All states are required by federal law to prevent electronic benefit cards from being used at liquor stores, gambling establishments and adult entertainment venues. Even Kansas’s more outré restrictions aren’t unique: Massachusetts also prohibits the cards from being used on cruises, and Alabama has a ban on using benefits to pay psychics.

But the benefits are intended to subsidize basic living expenses. State Sen. Oletha Faust-Goudeau, a Democrat who represents the Wichita area, told the Wichita Eagle that some of her constituents rely on welfare benefits to help cover rent, a large, lump-sum cost that — for people without bank accounts — usually needs to be made in cash.

Under the new rules, if someone receiving benefits plans to use her money to make a $600 rent payment, she’ll need to start withdrawing money and setting it aside 24 days in advance.

Actually, she’ll need to start even earlier than that.

That’s because Kansas’s debit cards come with a $1 fee for every ATM withdrawal. So over 24 days, this hypothetical woman would lose $24 in fees; she’d need to start one day earlier to make her rent payment.

And even that precaution would leave her coming up short. The Kansas cards charge $1, and the bank ATM usually adds on another surcharge fee. According to the Government Accountability Office, the average ATM withdrawal surcharge was $2.10 in 2012. That lowers the real maximum withdrawal to $21.90 per day. At that rate, a person receiving benefits will need to make a withdrawal on 28 days per month (no margin of error in February) to set aside enough to cover rent.

Over the course of a month’s transactions, families receiving the maximum benefits that Kansas allows would find 12 percent to 13 percent of their benefits eaten up by fees, if they relied exclusively on ATM withdrawals.

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Families have a few other options if they want to minimize fees: They can use their cards primarily to purchase goods in stores or they can get cash back while making purchases (60 cent fee per transaction, two free transactions per month). The burden is on them to figure out how to get access to as much of the money they’re entitled to per month, without losing a hefty chunk to fees.

When the law goes into effect, the biggest problem for poorer Kansas families won’t be where they’re not allowed to spend their money, but how much of the money they’ve been granted never winds up being theirs.

Leah Libresco is a former news writer for FiveThirtyEight.

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