1 in 4 Boomers Shuns Direct Deposit
Baby boomers, often on the cutting edge of new personal finance trends like online banking and bill paying, are lagging behind their elders on one popular banking amenity: direct deposit. A full 25 percent of baby boomers still receive their salary or other regular payments by paper check, compared with just 13 percent of people age 61 and older, a U.S. Treasury Department and Federal Reserve Bank survey found this week. That could have profound financial implications for taxpayers if baby boomers continue to scorn direct deposit of payments when they retire.
The Treasury issues more than 150 million benefit checks each year. If that paper was converted to direct deposit, the savings to taxpayers would be about $120 million annually. The money saved would boost the coffers of the Social Security Trust Fund.
Every paper check issued costs 80 cents, the government says, including postage, processing, and the high costs of dealing with lost, stolen, or forged checks. "We have a huge number of people who call us every year and say, 'I didn't get my check,' " says Alvina McHale, director of legislative and public affairs for the Treasury Department. "If it's a normal lost check, it can take two to three weeks to replace the check." If fraud is suspected, getting that replacement check can take months. That's a long time to wait for what might be a significant source of income.
And fraud abounds. Some 57,000 forged Treasury checks cost taxpayers almost $50 million in 2006, the department reports. "Whenever there is a problem with a federal benefit payment, 98 percent of the time it is a paper check, not a direct deposit," says McHale.
But 40 percent of baby boomers are unlikely to start using direct deposit in the next year, the survey found, either because they say they like receiving a paper check and going to the bank to deposit it or they simply don't like or trust direct deposit.
People currently receiving Social Security benefits who want to sign up for direct deposit may do so at www.GoDirect.org or by calling (800) 333-1795.