Replacing cheques with pay cards may benefit Ontario Works recipients

Moving from cheques to payment cards will cut cheque cashing businesses like MoneyMart out of the social assistance equation. 

About 700 people in the region receive their Ontario Works assistance via cheque

Those without access to banking services often turn to businesses like MoneyMart to cash their social assistance cheques.

Moving Ontario Works payments away from cheques and onto reloadable payment cards could shift close to $400,000 a year away from cheque cashing businesses and into the pockets of financial aid recipients in Waterloo Region. 

Ontario Works (OW) is a provincial program that provides money to low-income individuals for essentials such as food, clothing and shelter. The program is administered locally by regional government, and serves approximately 7,000 people. 

Of those, 10 per cent receive their OW payments via paper cheque, according to a report submitted to the community services committee.

The remaining 90 per cent receive the funds through direct deposit into a bank account. 

Cheque cashing costs

"To open up a bank account you have to prove who you are," said Carolyn Schoenfeldt, director of employment and income support for community services at the Region of Waterloo. 

Some people receiving OW assistance don't have the proper identification or the money to get or replace it, she said. A smaller group are sceptical of banks or just don't want to open an account.

As a result, the region provides them with a physical cheque that the individual must then convert to cash. For that, many of the recipients use retail cheque-cashing businesses, which charge a fee for the service. 

About $32 million in cheques have been cashed in the region by OW recipients in the last three years.

The amount has been steadily decreasing, with just under $9.6 million changing hands in 2019. 

Northern Cash on King Street in Kitchener told CBC it charges $1.99, plus 3.99 per cent of the cheque's total value, to cash it. 

If all OW cheque recipients in the region had been charged that rate, just under $400,000 of benefit payment funds would have flowed directly to cheque cashing business in 2019. 

Save fees 

The switch from cheque to card will generate savings for the region by reducing administrative and printing costs, Schoenfeldt said. 

Replacing or cancelling a lost card requires less administrative support than the same process for a cheque. 

Belinda Karahalios, MPP for Cambridge says the movement toward payment cards could also prevent theft. 

She's heard of people who are targets for robbery because others know they are holding their monthly OW disbursement in cash.

"This is something that goes on, and that people don't typically know about. So, I think this is a positive change," she said. 

Like a credit card

The reloadable payment cards will look like, and act similarly to, any other Visa card issued by the Royal Bank, says Sam Paulos, RBC's director of prepaid services.

RBC will be the region's banking provider for the program. 

"The real difference is there's no credit extended on the product," he said.

"If somebody has a hundred dollars on this product, then they have a hundred dollars available to them to spend at a merchant or to withdraw from an ATM, or to conduct a transaction online."

According to Paulos, Ontario is leading the charge with the move from paper to plastic, but in general Canada lags behind the United States. 

"Every state in the U.S. and the [American] federal government offers a card option for disbursement payment in a variety of programs," he said.

In 2016 Ontario's provincial government began modernizing the Ontario Disability Support Program (ODSP) by introducing the cards. 

According to the report submitted to committee, the Region of Waterloo is in the third "wave" of rollouts for municipalities making the change to OW.