Page last updated at 14:31 GMT, Saturday, 23 January 2010

Concern over pre-paid card costs

By Ben Carter
Radio 4's Money Box

People queuing outside a Jobcentre plus office
The government says there are better options for benefit payments

People in some of the poorest parts of the country are having benefits paid onto pre-paid cards, but many are not aware of the costs involved.

An internal e-mail from the Department for Work and Pensions expresses concern at the lack of customer awareness.

One benefit office has received requests to pay benefits for almost 100 people directly onto these pre-paid cards, which incur charges.

The card providers say the cards promote financial inclusion.

However when staff at the Clyde and Fife Benefits Delivery Centre contacted customers before processing the requests, they found that the majority of customers were not aware of the charges.

Unlikely to be suitable

One of the companies mentioned in the e-mail sent 46 applications to the benefit office requesting benefits to be paid on to a GO: Card.

The forms were accompanied by a letter from Go Money Solutions sales director, Steve Tobin. In the letter Mr Tobin says the forms were obtained "through face to face marketing" in the local area.

The DWP confirmed it had raised concerns with Go Money Solutions and it had subsequently revised its sales practices.

Minister Helen Goodman told Radio 4's Money Box: "Considering the charges that are associated with these cards, it is very unlikely that they are suitable for our customers.

"We certainly don't endorse them. There are much better options available for having your benefit/pension paid, such as the Post Office card account, a basic bank account or current account."

Online shopping

But Mr Tobin says the GO: Card offers much more in terms of financial inclusion, flexibility and convenience:

"We offer our customers the chance to take part in fully utilising the internet's many advantages in purchasing goods and services at considerably discounted prices and convenience. We do not charge for this facility."

While most banks offer basic banking facilities to all customers, many will not offer a debit card to people with a bad credit history. A pre-paid credit card is currently the only way those customers can shop online.

A GO: Card costs £10 to buy and a £7.50 annual management fee is charged after the first month. It costs a minimum of £1.25 and a maximum of £2.50 to have each benefit loaded on to the card and the same charges apply for each cash withdrawal.

Mr Tobin also said that customers are made fully aware of all the card's associated charges:

"All customers are provided with a copy of the terms and conditions at the time of making their ensure clarity a copy will in future be sent to the customer with their card delivery."

Basic bank accounts

Mike Dailly, principal solicitor of Glasgow's Govan Law Centre said he was concerned about the fees charged by these cards.

But he added: "I would accept that we do have problem with basic bank accounts not being available enough and not being promoted enough for people on low incomes."

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