The Amateur Financier

As though of you who have been following my blog are aware, I am currently unemployed.  (I’m actually working part-time, but earning a low enough rate that I am still able to receive unemployment benefits.)  I am also a resident of Pennsylvania, and have been all my life.  And so, it was with great interest that I read this article on CNN about the fees on Pennsylvania’s unemployment debit cards.  (Thanks to Mrs. Micah for making note of this article on her blog.)

As a little bit of background, Pennsylvania pays out unemployment in one of two ways.  First, you can opt for direct deposit into your bank account (this is the path I chose, since I’m attempting to do most of my banking online anyway).  If you are unable or unwilling to do direct deposit, you will receive a debit card, onto which your benefits will transferred when you apply for benefits every two weeks.  These are the only options that Pennsylvania (and many other states, I gather) seems to allow; it’s no longer possible to get paper checks sent out.

The problem with the debit cards is that there are numerous fees that are triggered when you take certain actions.  These actions can range from making too many withdraws (even at participating banks) to accessing your account via the telephone too many times.  A short list includes the following:

-Withdrawing money from a PNC or Wachovia ATMs: $1.50 per withdraw (you are given at least 1 free withdraw using these ATMs per deposit)

-Withdrawal from Alliance One or Seven Eleven ATMs: $1.50 per withdraw (no free withdraws offered)

-Withdrawal from other ATMs: $1.50 per withdraw, plus any surcharge fees from that bank

-Teller Withdraws: No fee

-Deposit transfer: $1.50 each time

-Purchases in the U.S.: No fee

-ATM Balance Inquiry: $0.40 each time

-Monthly account access via telephone: $0.35, after using up the five free calls provided each month

How can you control the amount of money that gets eaten away by these fees?  Simple, know your habits and how you’re going to use the debit card.  If you never use an ATM (I don’t, myself) and either pay for your purchases directly or withdraw the money using a teller, you can get the debit card without worrying about being nickeled and dimed to death by fees.

On the other hand, if you frequently use ATM machines, especially ones from companies other than PNC, Wachovia, Seven Eleven, and Alliance One, you should at least consider having the cash directly deposited into your checking account.  If you find that you’re paying too much in fees to access your unemployment money (and I’d say that paying any fees is too much), it is possible to change your account over to direct deposit without much difficulty.  When you are filling out your biweekly unemployment application, you should see the appropriate link available on your state’s system. (It’s one of the first links on the PA unemployment system.)

Here is the site for EPICard, the Pennsylvania unemployment debit card system.  It also serves Florida, Georgia, Illinois, Indiana, Iowa, Mississippi, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Texas, Utah, and Virginia.  They provide numerous services, and could be quite helpful if you get your money put onto the debit card.

As those of you who’ve read my introductory blog entry should know, I’m currently working part time. I’m still receiving unemployment benefits, as a result of my termination, and because I’m working only part-time, those benefits have continued unabated. I’ve noticed, as I’ve perused various PF blogs, that there seems to a fundamental misunderstanding of how unemployment works. I found several responses to J.D.’s recent post on Get Rich Slowly which seemed to imply that anyone receiving unemployment would have no interest in getting a part-time job, for fear of losing their benefits. So, here’s a little primer on how unemployment really works (at least in my home state of Pennsylvania; other states might have different policies):

After being downsized in November, I applied for unemployment. I submitted all my paperwork and the unemployment office calculated that, based on my wages over the previous year, I was entitled to receive about $400 each week (under half of my previous wages). (Actually, they used the four quarters prior to the quarter immediately before the quarter when I was downsized. I lost my job in November of 2008, so they used the third quarter of 2007 through the second quarter of 2008 (July 2007 – June 2008) as the basis for computing my benefits.) I’ll receive a total of about $11,000 from unemployment, which is scheduled to be fully paid out in May, unless I start getting other money coming in and can extend the length of time I receive unemployment (more on that below).

On top of that, I’ve got a ‘part-time work allowance’, of about $150 each week. If I work part-time and make less than that amount, I’ll still receive the full amount of unemployment. I’m currently making $120 each week, and receive the full amount of my unemployment, in addition to the money from my part time job.

If I make MORE than $150 but LESS than the $550 in total weekly payment, my unemployment will be cut down to bring my total compensation for the week down to that level. The difference between the full unemployment benefit and what I actually receive will be credited, and the length of time I can receive unemployment will be extended. If I started making $350 a week part-time, then my unemployment benefits will go down to $200 a week. But, since I’m still entitled to the full $11,000 in unemployment benefits, the amount of time I’ll continue receiving money from the unemployment office will be extended.

If I make MORE than $550 a week while still working part time, I’ll stop receiving unemployment payments, but again, the benefits will roll over, so if I start making less money before finding a full-time job, the payments will start to pick up again. (I believe after two years or so, I’ll be removed from the system, even if I still have some unemployment benefits remaining due to roll-overs. Until that point, I’ll still have unemployment benefits I accrued during my previous full-time work period.)

One advantage of this system is that there’s little, if any, disincentive towards working. Any level of work will generate more income than relying on unemployment alone, so people can find part-time work without worrying that a $7 an hour, twenty hour a week job at McDonald’s will destroy their ability to get unemployment and drop their income. If anything, there’s increased incentive to find MORE part-time work; by increasing my working income, I’ll lower the amount of my benefits I’ll need to tap each week to make the same amount of money, and I’ll be able to stretch out my safety net for a longer period of time.

The overall result is a smoothing of my income; I’m ensured of a minimum payment each week, with the promise that as I increase the amount I earn with part-time work, my weekly income will increase, regardless of how much I’m making with my part-time job. This allows me to take jobs, even those that pay less than $400 a week, and not worry that I’ll lose money in the bargain.

Hopefully, that helps to explain how unemployment works; the idea that people on unemployment won’t take part-time jobs is a misunderstanding, and I hope I’ve managed to help those who had the wrong idea about unemployment benefits.