Via Pat Garofalo, here’s another income stream for the banks that has opened up in the past few years. Call it another “financial innovation.” I’m talking about debit cards to deliver benefits. Banks issue the debit cards, which allow recipients to access welfare or unemployment benefits, and they make a small profit on fees from the services. This service doesn’t work for people who live many miles from an ATM of that particular bank, but they often have no recourse. And now, the system is expanding, at least in South Carolina, into tax refunds:

Last week, the Charleston Post & Courier’s David Slade wrote a column about South Carolina’s new practice of issuing tax returns in the form of prepaid debit cards from Bank of America. The state Department of Revenue announced the program back in December, but conveniently left off the long list of fees which customers without BofA accounts will be subject to.

For every withdrawal from a non-Bank of America ATM, BofA will take $2.50 off the top — in addition to any fees the ATM owner might charge. Want to get your money directly from the bank? The first time’s free, but every withdrawal after that comes with a $10 fee. Leaving the country? Bank of America takes 2% of every single transaction you make outside the United States. Had enough and want to close your account? No problem — after a $5.00 closure fee, of course.

As Slade puts it, why should you have to pay to access your own money? “They’re not even nickel and diming people, they’re five-dollaring and 10-dollaring people,” commented consumer advocate Sue Berkowitz, Director of the Appleseed Legal Justice Center.

This looks to be a growth industry for the banks. They have next to nothing in overhead, as they already have the architecture for debit cards. It’s not like the plastic costs a whole lot more. And they just rake in fees from everyone who gets a tax refund from the state who doesn’t manage to opt out of the practice. By the way, Bank of America secured the rights to run the tax return system in South Carolina with a no-bid contract (helped along by a large donation to the state Treasurer, no doubt). Bank of America is helpfully not charging the state for this, and since they get a pure benefit, taking taxpayer dollars for the processing would just add insult to injury. So I guess we can be thankful for that.

CFPB might want to take a look at this. There’s no social benefit whatsoever to getting a debit card, where you have to pay to access your own money, over a check. I don’t even see how there’s a financial benefit for the state. It’s just legalized theft.