The Maine Department of Labor will begin phasing out paper unemployment checks next week, replacing them with Visa debit cards or direct deposit. Recipients of unemployment benefits will be able to choose between the two options.

Department spokesman Adam Fisher said the state is making the switch because of the cost and security issues associated with paper checks.

“The first priority was really security,” Fisher said. “We would send checks to people and get a lot of them back because the recipient had moved.”

About 40 percent of the 15,000 Maine residents who are currently collecting unemployment benefits had signed up for the debit cards by last week, and the remainder will use direct deposit, he said.

As many as 125 checks a day are returned because recipients have moved, and state officials were unsure how many checks had actually been received. Fisher said the department has employees whose sole job is to handle returned checks.

He said the state estimates the new debit cards and direct deposit service will save more than $100,000 a year while improving security.

Nearly half the states are now using debit cards to distribute unemployment benefits. Fisher said Maine has studied what has happened elsewhere to avoid pitfalls.

“The major criticism was that people didn’t know how to use the cards without accruing fees,” he said. “Therefore we have been trying to give people advanced notice and put out information explaining how the card works.”

Christopher Vetek, 29, of Portland recently found a job but was previously on unemployment. He selected the direct deposit method but also received the debit card in the mail.

“The packaging makes it look like a credit card offer,” Vetek said. “It doesn’t say anywhere that it’s optional, so at first I thought it was mandatory.”

Vetek said he understands the security issues associated with using paper checks, but he still believes the debit card option is problematic.

“I think it is unnecessary,” he said. “People see the new packaging and new fees and it just brings more anxiety to their lives.”

Jordan Yanni, 25, of Gray, who has been unemployed for four months, said he prefers the direct deposit system to the debit card.

“It’s frustrating enough to be on unemployment without being charged extra money,” Yanni said in reference to the fees. “I don’t know why they can’t work out a better deal with the bank.”

Yanni also wondered whether people on unemployment who are getting debit cards for the first time will be judicious with how they spend their benefits.

“I’ve had a debit card since high school. But individuals not used to having them may spend more money than they normally would,” he said.

Fisher said there are no “blocks” on the card and the state is not tracking purchases, so it’s up to claimants to use their unemployment benefits responsibly.

Residents who qualify for weekly benefits can sign up for the debit card service over the phone, on the Internet or by mail. They will receive a card with their name embossed on it from Chase Bank.

“The card is tethered to a specific account and money will be deposited every week that the claimant qualifies,” Fisher said. “In order to collect unemployment, you have to be actively seeking, and able to accept, new work.”

Fisher said Chase Bank was selected because it offered an arrangement that wouldn’t cost the state money and would have relatively low costs for claimants.

Benefit recipients can make one free withdrawal per week from a Chase Bank ATM, or from Key Bank and Allpoint; both are local banks working with Chase.

“There is no overdraft protection. So claimants do have to be aware of their balance,” Fisher said.

Staff Writer Max Monks can be contacted at 791-6345 or at:

mmonks@pressherald.com