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Plan Well, Retire Well

Saving and investing your money

Federal government says, Go Direct! Go Electronic!

There was a time when you could get your Social Security check by mail and buy a savings bond at the bank or through payroll deduction. Those days are drawing to a close.

Savings Bonds

As of January 1, 2012, you will no longer be able to visit your local bank or credit union to buy a savings bond. The bonds will still be for sale, but you'll have to do it through Treasury Direct, where you set up an online account with the US Treasury. This is the same website and account where you purchase other Federal debt instruments such as Treasury Bills, Notes and Bonds, and TIPS. For now, it will be much less convenient to purchase Savings Bonds as a gift, but the Treasury hopes to make that less cumbersome in the future.

Federal Benefit Payments

Go Direct is the US Treasury's campaign to have all benefit payments paid electronically by March 1, 2013. This includes SSI, Social Security, veteran's benefits, and other federal payments. If you have a checking account, you'll be asked to have your check automatically deposited. It's safe, secure, and reliable. You can set it up online or by calling (800) 333-1795. Be prepared by having the necessary information on hand.

Maybe you like the feel of getting that paper check and figure you'll just ignore this whole thing. The Feds are one step ahead of you. If you don't provide a bank account for auto deposit, you'll still be converted to electronic payments. Your money will be deposited each month onto a prepaid debit card known as Direct Express ®.

The Direct Express ® card is a type of prepaid debit card, like ones you may have seen advertised as a way to carry money for a trip or to give a child. It carries the MasterCard logo, and you can use it pretty much the same way you use any MasterCard-branded credit card or bank debit card.

The US Treasury negotiated an extremely low-cost fee structure for Direct Express ®. You can make purchases in-store or online, get cash back when you make a purchase, or get cash from a bank teller – all for free. You're allowed one free ATM withdrawal for each benefit payment deposited to the card. You can check your balance online or at an ATM for free. You'll pay a fee if you use the card outside the United States, take additional ATM withdrawals, request paper statements, or request a replacement card more than once per year. Pay attention to these exceptions, and you'll probably never see a fee for using the card.

Both of these changes are aimed at saving the federal government tens of millions of dollars. Paper checks and bonds are much more costly to issue, mail, and handle.

My dad's Social Security check has been automatically deposited to his checking account for years. But if he had to make the change now, it would be impossible for him to understand and do it on his own. If your parent, grandparent, or another elderly friend is still receiving paper checks from the federal government, talk with them about this change. Help them decide whether to have their benefits deposited into a checking account or onto the Direct Express card. If they're not comfortable going online to set up auto deposit, they can call (800) 333-1795. Help them prepare by identifying the information they will need about their benefit payment and their bank account.

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I would argue that debit cards are still the better card option for college students than credit cards, even though banks are spending heavily to convince you otherwise( Using debit cards teaches you how to use money responsibly, because you spend what you've already deposited into your bank account. Even peer pressure cannot force you to spend more than that, which is not at all the case with credit cards and we know how easy it is for a young person to get in huge debts. The lesson is well worth $3 or $5 a month.
by Jay Gould on Tuesday 11/1/2011