The National Consumer Law Center examined the 40 states that now contract with banks to issue debit cards -- instead of paper checks -- for unemployment benefits. West Virginia's program charges the highest fees in the nation for out-of-network ATM withdrawals ($2.75 each) and denied transactions ($1.75), the center found.

The NCLC looked at payment options, fees, and access to account information available to card users.

Since 2009, WorkForce West Virginia has contracted with JPMorgan Chase to provide the cards to people receiving unemployment. Today, about 87 percent of the state's nearly 97,000 unemployment claimants use the debit cards to get their benefits, said WorkForce West Virginia spokeswoman Courtney Sisk.

These cards can help people who don't have bank accounts, says the NCLC. People don't have to pay check-cashing fees, and they can use the cards to pay bills over the phone or on the Internet.

"Yet prepaid cards come with many fees that nickel and dime unemployed workers at a financially stressful time," the report's authors write. "Fees can drain precious dollars from families at the very time they need it the most."

The programs don't cost states anything, and they cut costs such as postage. The banks make money by charging transaction fees.

In West Virginia, the average unemployment payment is $266 a week, according to the U.S. Department of Labor.

The NCLC had three ratings for states' programs: "problematic," "runner-up," or "best bet." It said the Mountain State could improve its debit cards by eliminating fees for balance inquiries -- currently 25 cents at out-of-network ATMs -- and offering paper statements.

"On the positive side, the [West Virginia] card offers unlimited free in-network ATM withdrawals, and the state recently added direct deposit, making it one of only three states to give recipients all three options: direct deposit, a prepaid card or a paper check," the report states.

WorkForce West Virginia started testing its direct-deposit program in April, and the service was ready May 10, Sisk said. 

In 2009, state officials told the Gazette they would start a direct-deposit program by the end of that year because of complaints about the debit card program.

Dave McMahon, a Charleston lawyer who represents low-income people, said the state deserves credit for offering alternatives to the debit cards.

In using the debit cards, "I think we need to be careful that saving the state money in processing isn't just shifting the cost of processing to people on unemployment," McMahon said.

People can avoid fees by using their cards for point-of-sale transactions, rather than withdrawals at ATMs, he said.

In some areas of the state, it might be hard for people to avoid using out-of-network machines, McMahohn said.

WorkForce West Virginia gives people information on how to avoid or reduce fees, Sisk said. Users also receive materials from the bank.

People who need a replacement card are not charged for one, and all users can check their balance online for free, Sisk said.

In an email to the Gazette, Sisk said the agency is "always looking for ways to improve services to our customers."

States negotiate the debit card fee structures through the bidding process.

"When the debit card contract is sent out for re-bid this fall, we will accept the bids with the lowest overall fees to the customers just as we did when accepting the bid from Chase," Sisk said. "We will also take steps to make sure the bank that wins the bid has sufficient numbers of ATMs around the state in an effort to reduce fees."

Chase contracts with 14 states for unemployment debit cards, said Chase spokeswoman Mary Kay Bean. Most of those states offer alternatives to the cards, she said.

NCLC found that California and New Jersey have the best debit card programs. Both contract with Bank of America.

In five states, card users face $10 to $20 overdraft fees: Arkansas, Idaho, Nebraska, Ohio, and Oregon. U.S. Bank issues those states' cards.

Tennessee's program, provided by Chase, has the most "junk fees" for services such as balance inquiries and ATM withdrawals, according to the report.

Reach Alison Knezevich at alis...@wvgazette.com or 304-348-1240.