Spotlight Exclusives

A Bank Account for the Most Vulnerable

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A bank account is an essential financial product to create a personal safety neta resource that can be tapped by a household in financial emergencies, and to avoid public assistance. But, fees and other barriers make this simple product still a reach for many lower-income families. Access is particularly elusive for recipients in the Temporary Assistance for Needy Families (TANF) program. It۪s time for that to change.

A new report called “Building a Personal Safety Net through a Bank Account” by Burst for Prosperity reveals a critical opportunity for our state of Washington to help low-income people find ways to save. The same lessons we are learning in Washington can be applied to efforts to help low-income Americans across the country.  

According to the report, connecting welfare participants to “no fee” bank accounts through the contracting financial institutions that administer the electronic distribution of benefits in each state can be effective in encouraging asset accumulation. With a majority of states already contracting with financial institutions to distribute benefits electronically to reduce costs of printing and mailing checks, this is a realistic option to encourage savings.

The problem is that not every state follows this “no fee” model. In Washington, WorkFirst – our TANF program – disburses cash assistance to eligible families every month. They have the option of being issued an Electronic Benefits Transfer (EBT) card that may be used as a debit card, or to have the benefits deposited by Electronic Funds Transfer (EFT) into a checking or savings account. This EBT card is administered in partnership with JP Morgan Chase.

Due to high fees, both to our state and to recipients, this partnership fails to achieve its full potential. Over the course of the last year, Washington has given the bank vendor almost $10 million to administer this program. 

But this isn۪t all that the bank vendor has extracted from our taxpayers. Thanks to an 85 cent per transaction automated teller machine fee, they have collected more than $100,000 a month – $1.2 million a year – from WorkFirst parents. In addition, surcharges at non-Chase cash machines brought in more than $890,000 in the first quarter of 2011.

Within the constraints of the current program, participants can only escape these transaction fees if they have cash benefits deposited directly into a personal bank account. Yet, at this time, a mere 12 percent of participants take advantage of direct deposit.

This is a loss for working families and a loss for our state. Public assistance programs should be creating opportunities to access “no fee” bank accounts to start saving money. The Burst for Prosperity report reviewed data from multiple pilot programs and found that “no fees” were the strongest driver of access to and maintenance of bank accounts by low-income consumers. 

These “no fee” accounts also match the realities of low-income life in America. Only eight percent of people making under $25,000 annually currently have enough in their bank accounts to meet minimum balance requirements.  

Given the urgency of this problem, we in Washington are working across the aisle to take a stand for low-income families. Recently, a bipartisan group of over 30 lawmakers in our state signed a letter urging Washington۪s Department of Social and Health Services to negotiate a better deal.

Other states must follow suit and take a closer look at their own benefits systems. If we are going to overcome the misperception that low-income people cannot save, even though research consistently shows they can, we must give them the opportunity. In Washington, this means ensuring that when WorkFirst participants begin working they have the means to begin saving. Our goal must be a bank account issued to every benefit recipient at the time of their application for public assistance. 

A personal financial safety net is vital to economic security. As a Democrat and a Republican, we both agree that as our state and others consider policies to strengthen their economies and the well-being of their families, it is critical that they create opportunities for people of all incomes to save.

To print a PDF version of this document, click here.

Senator David Frockt (D) represents the 46th Legislative District and House Representative Bill Hinkle (R) represents the 13th Legislative District in the Washington State Legislature.

The views expressed in this commentary are those of the author or authors alone, and not those of Spotlight. Spotlight is a non-partisan initiative, and Spotlight۪s commentary section includes diverse perspectives on poverty.  If you have a question about a commentary, please don۪t hesitate to contact us at


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