Around half a million beneficiaries of Social Security will need to take action regarding the method in which they receive their monthly benefits as an executive order will soon come into effect. A March 25th executive order titled “Modernizing Payments To and From America’s Bank Account” has stipulated that all federal payments and disbursements are to be made electronically as of September 30th, 2025, meaning that the use of paper checks will be phased out completely starting in October.
Whilst this change is being made in pursuit of increased operational efficiency and cost-cutting, going digital may prove to be difficult for some Social Security recipients who are, for instance, elderly and technologically inept, or those who are unbanked. Here is all you need to know about this upcoming digital mandate.
All federal transactions are going digital
Digitization has been steadily integrated into most aspects of our daily lives due to its ability to increase efficiency and the reasoning behind phasing out the use of paper based payment method in the federal government is no different. In addition to increased efficiency, opting for electronic payments will also decrease the risk of theft and reduce costs significantly. According to the U.S. Department of the Treasury, “issuing a paper check costs about 50 cents, whereas an EFT costs less than 15 cents. This shift could save the federal government millions of dollars annually.”
The push to shift to electronic payment methods entirely has been in the works for over a decade and now, a concrete date for this change has finally been set.
“I believe this is a continuation of the Administration’s cost cutting efforts,” National Social Security Advisors President Travis Stanley said. “In addition to reducing staff size by 10%, they continue to look at any and all measures to offset costs to the program. The recent trustees report stated that the shortfall for Social Security was estimated to be $25.1 trillion over the next 75 years. While administering the program is a relatively small expense, any reduction in costs will help.”
“I think it’s just the way of the world nowadays,” Jim Blankenship, a certified financial planner with Blankenship Financial Planning shared. “Paper checks are the exception rather than the rule for most payments… I imagine the savings figures touted are inflated somewhat, but certainly use of electronic transactions is bound to be more cost-effective in the long run.”
What should Social Security beneficiaries do?
Over 99% of current beneficiaries already receive their monthly benefit payments electronically, however, the remaining <1% of recipients amounts to a little over 500,000 individuals — approximately 20,000 of which are unbanked. Whilst the executive order has stipulated that exceptions will be made for the unbanked and in cases where electronic payments are not feasible, a fair number of beneficiaries will likely have to make the transition and soon so as to avoid any delays or interruptions with their payments.
The SSA has also shared that it is “proactively sending notices to people who currently receive paper checks, to explain the upcoming change and highlight the benefits of switching to electronic payments.” As such, the two payment options available to recipients now are Direct Deposit and Direct Express Card.
“I believe the only option moving forward is going to be for people to sign up for Direct Express,” Stanley noted. “It’s a debit card that is automatically loaded with a person’s Social Security benefits monthly.”
If a beneficiary opts to transition from paper checks to a Direct Express Card, Blankeship warns that, “users of any sort of debit card need to understand that they should take extra precautions with the card to ensure that it isn’t compromised. More so than with a credit card, which has significant inherent protections built-in.”
“You’re limited to the funds actually available in the account,” Blankenship added. “There is no credit line included. And purchases are directly debited from the balance, either immediately or within a day or two. There’s no grace period like you have with credit cards.”