That idea could become a reality for some Australians, with the government currently trialling a Healthy Welfare Card for people receiving welfare payments. The cashless card is designed to curb the purchasing of alcohol and drugs, as well as money spent on gambling.
According to Social Services Minister Scott Morrison, the card is basically like any other card issued by a bank in Australia, except that it “just precludes a couple of items from being spent with what is in effect a debit card”.
“…It just means there isn’t as much cash in the system and it is designed to ensure there isn’t the cash there for things like drugs and various other things which are just an absolute poison in these communities,” he says in an interview with radio station 3AW.
The trial was inspired by mining magnate Andrew “Twiggy” Forrest, who suggested a card-only form of income management in his 2014 Parity Report for the government. In Forrest’s version, the card would be issued to all welfare recipients except those on age and veteran pensions.
Current trials are happening in select communities around Australia, with Minister Morrison saying there was a lot of consultation with stakeholders in each of the communities.
But regardless of the trials, this system brings up some interesting questions about how we pay for things and what happens when different options are taken away or limited. With that in mind, we thought we would take a closer look at how the Healthy Welfare Card would work and what sort of issues could come up from going cashless for good (with or without this card on hand).
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What is the Healthy Welfare Card?
The Healthy Welfare Card, in its current form, is a bank-issued debit card that provides welfare recipients with access to their financial support funds. It uses contactless payment technology (ie PayPass or PayWave), so that cardholders can tap-and-go when they make a payment at key places like the supermarket or petrol stations.
In theory, this card is kind of like a hybrid of an everyday debit card and a prepaid card because, once you used all the funds available on it, you would have to wait for your next payment to come through before you could make more transactions.
The government says the Healthy Welfare Card would use technology that’s already in place to some extent.
“The technology required to block certain purchases or retail merchants from credit card expenditure has been available for some time and usage has increased over the last 10 years,” it says in a statement on the Department of the Prime Minister and the Cabinet website.
“For example, corporate credits cards frequently block gambling outlets. However, the sort of widescale application and practical contemporary approach of the Healthy Welfare Card will make it a first in Australia.”
It says it has been in discussions with major financial institutions and retailers about the feasibility of a nation-wide Healthy Welfare Card system, with the initial response relatively positive.
“Discussions with Coles, Woolworths, IGA, the Commonwealth, National Australia Bank, ANZ and Westpac banks, eftpos Payments Australia Limited and MasterCard, indicate that the technology to support the card is readily available and affordable. It will use the technology that most Australians use in everyday life.”
Concerns about the Healthy Welfare Card
While the Healthy Welfare Card is very similar to financial tools and technology we already use, the key differences have raised some concerns and criticism against the plan – and it’s move towards a card-based, controlled welfare system.
For starters, there was concern that the card could be demeaning and make life a lot harder for people already struggling in Australia when news of the proposal first broke at the end of 2014. In a joint statement from 37 stakeholders – including Australian Council of Social Service (ACOSS), Financial Counselling Australia and Jobs Australia – signatories compared the Healthy Welfare debit card with the current Basics Card and expressed concern that it would do little to solve any serious problems and could be a logistical nightmare.
The statement says it would be a huge challenge for people to be “forced to live without cash in communities in which the cash economy continues to be significant”.
“These individuals may have difficulty making small purchases without cash (many retailers require a $10 minimum spend), will be limited to shopping at retailers with EFTPOS facilities (which will exclude many smaller and second-hand retailers), will make payment of small expenses associated with children’s education difficult (payment for excursions, purchases at the school canteen) and will preclude individuals from accessing services or products requiring cash (parking metres, shopping trolleys, laundromats),” it says.
The Australian Bankers Association (ABA) has similarly expressed its doubts over implementing the Healthy Welfare Card, citing “technology and infrastructure limitations” and costs as major concerns. The ABA says that the technology needed for this kind of debit card would be “costly and complicated involving changes to be made throughout the payments system at all levels, to retail banking systems and product offerings and to the Government’s Centrelink and payment administration systems.”
“Additionally, the ABA not does support using the banking industry to block access to cash or prohibit the purchase of goods and services available to other Australians,” it says in a submission to the Forrest Review.
Basically, the vagueness of the card and its implementation has left many stakeholders concerned about creating a system where some people have full access to their money and others are limited to a debit card. In response to these concerns, Minister Morrison has said that there would be a “cash component” available that could be adjusted to suit the community and the cardholders.
Cards vs. cash
While the widespread introduction of the Healthy Welfare Card may not happen any time soon, the debate around it has brought attention back to exactly how we are spending money.
Up until a couple of years ago, cash was the number one payment method in Australia. But the introduction of new technology and products including contactless payments, fee free debit cards, prepaid cards, and increased online shopping options has seen a huge shift in the ways we pay for things.
Cash sales are falling at a rate of almost 5% per year, according to data from the Australian Payments and Clearing Association (APCA), while debit card and credit card transactions are on the rise.
The latest APCA data shows that we made total of 741 million cash withdrawals in 2014, down from 778 million the year before. In contrast with that, we made a whopping 312 million debit card transactions per month in 2014, to an annual total of around 3.7 billion transactions per year. And that’s not including credit card transactions, of which there were around 1.9 billion for the year.
All up, we made some 5.6 billion card transactions in 2014 alone, which is a pretty good indication of our trend towards paying with plastic instead of notes and coins. In fact, APCA has predicted that cash will be used less and less for retail payments from now on “as more payment choices offering greater convenience become available to consumers”.
On the other hand, as the joint statement against the Healthy Welfare Card pointed out, there are times when cash is the most appropriate way to pay for things. Some retailers – particularly smaller businesses – have $10 minimums for eftpos transactions, while vendors at markets, other community-based retail hubs and ticketing systems on public transport often don’t have card facilities. All in all, even APCA has said that cash will continue to be “an important method of payment” in Australia, so having a combination of cash and cards is still the best option for most people.
Conclusion: How to make the most of any debit card
As cash becomes a less common way to pay, it is important to consider the different ways you can use a debit card and what features will help you get the most bang for your buck. So here are a few tips to consider if you find yourself using one card for most or all of your transactions:
- Remember your PIN: Now that people can’t sign for transactions, it’s important to remember your PIN without putting yourself at risk of card fraud. Try to either learn your PIN by heart, or change it to something you can remember so that you never have to write it down and risk it falling into the wrong hands.
- Explore online banking: Online banking gives you a way to manage your money, and each bank has different features designed to help achieve a wide range of goals. Taking the time to explore internet banking facilities will help you figure out how to easily check your balance, track your spending and stay on target with savings goals (or at least make sure you have money for the necessities).
- Set up an account with PayPal: Using PayPal or a similar kind of account means that you can make secure transactions more quickly online. It also gives you an opportunity to make payments without cash even if merchants don’t accept cards – just ask if they have PayPal Here, login through your mobile device and follow the prompts to make a payment.
- Find out about “Pay Anyone” options: Most banks now have “Pay Anyone” facilities that let you make a direct payment to anyone using details like their bank account information, email address or phone number. This service could make it a lot easier to get by when you don’t have access to cash but need it (ie when you’re splitting the bill at a restaurant).
- Track your spending: Use internet banking to look over your spending habits and see exactly where your money is going. It could help you figure out where you can cut back on spending or at least show where the bulk of your money goes so that you can work out a savings plan based on your actual spending patterns.
These are just a few of the things worth considering when a debit card is your main payment method – whether by circumstance or choice – so that you can make the most out of using your card.
But as far as the Healthy Welfare Card is concerned, it still looks like it is a long way off being a standard option for people on welfare payments. As Minister Morrison said in a press statement, the government is “not rushing into it”.
“We have been talking to banks about this as well and technology providers,” he says.
“We are just going to take it methodically step by step because you don’t want to rush to failure with something like this, you want to get it right and that’s what we are doing.”
But regardless of whether or not the plan goes ahead, it has given people an opportunity to think more about how they spend their money. And by taking a closer look at the trends in Australia, as well as your own spending, you should be able to make more informed payment choices so that you really get the most out of your debit cards, credit cards and cash options.