Additionally, the report stated that federal prepaid card programs had slightly higher interchange per transaction than state programs – 38 cents as opposed to 29 cents. But, as a percentage of the total transaction amount per card, interchange was "essentially the same" for federal and state programs, the Fed noted.
"This may be explained by the structure of interchange fees charged by payment card networks," the report said. "In general, interchange fees for both signature-based and, more recently, PIN-based networks are structured similarly to credit cards in that they include both an ad valorem [according to value] and a fixed component. The higher average per transaction interchange fee for the federal programs may be attributable to the higher average value per transaction."
However, the report also found the total fees charged cardholders per card were slightly less on federally funded cards than their state-funded counterparts. For example, the average ATM transaction fee on a federal program was 55 cents compared with 62 cents on state programs.
The banks that took part in the study – constituting 90 prepaid card programs altogether – reported that 185.5 million ATM cash withdrawals were made using government benefit cards in 2010. The average ATM cash withdrawal using federal benefit cards was $179.04, while the average ATM withdrawal using state and other "local" benefit cards was $130.68 in 2010.
The report noted that the average ATM fee charged cardholders was approximately 20 percent less than the interchange fees bank issuers returned to ATM operators for those transactions.
Overall, cardholders were charged an average of $9.04 in fees per transaction on federal benefit cards, as opposed to $9.81 for state-funded cards. Among other fee metrics, the Fed found:
The Report to the Congress on Government-Administered, General-Use Prepaid Cards can be accessed at www.federalreserve.gov/publications/other-reports/files/government-prepaid-report-201107.pdf.
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