NEW YORK (BankingMyWay) - The U.S. government is in “Phase One” of a 10-year campaign to phase out Social Security checks. The government is trying to save money and time by transitioning recipients to electronic direct deposits, but with only a handful of exceptions.

As of May 1, new Social Security recipients will no longer have the option to receive paper checks. For existing recipients, that deadline extends to March 1, 2013. After that, neither group will be issued paper checks, the Treasury Department says.

There are some exceptions though, for people aged 90 and over, mentally impaired Americans, and recipients in “very remote areas”.

For the unbanked who don’t meet any of these criteria, the Treasury Department can issue a Direct Express Debit MasterCard onto which social security payments can be made. That card, issued by Comerica Bank, has no sign-up fees, monthly fees or overdraft charges. More than 1.5 million Americans have signed up, according to the Treasury Department.

In announcing the switch to paperless payments, the Treasury Dept. noted that "the Direct Express card is structured in such a way that it may be used at no cost to the payment recipient, thus minimizing a beneficiary's risk of incurring a financial hardship to receive and use his or her benefits."

One fly in the ointment of the new system, though, is the potential for identity theft a point critics have been making since the news of the change came out in 2010. But Treasury executives say that, on the contrary, secure e-payments actually reduce the chances of identity theft. In particular, the agency says federal employees are under strict enforcement rules on how they handle sensitive consumer information so that it doesn’t fall into the hands of a scammer.

From a budget point of view, the Treasury Department figures it can save $120 million a year by transitioning to paperless payments.

“The conversion from paper to electronic payment is a long-standing goal for Treasury,” says David A. Lebryk, a spokesperson for the U.S. Treasury. “With this change and the publication of the final rule, we’re the closest we’ve ever been to an all-electronic Treasury, which will save taxpayers more than $1 billion over the next ten years."

To make the transition as “smooth as possible”, Lebryk adds that the agency has embarked on a huge public information campaign that will involve 1,400 national, regional and local partner organizations to get the word out on the switch to paperless Social Security checks. The campaign, called Go Direct, has a website where consumers can go for more information. Uncle Sam is urging consumers to make the change now at the Go Direct website, or by calling 1-800-333-1795.

It’s a new era in government payments, with Social Security the latest in line to go the e-payment route. No longer will Americans take that monthly trek to the mailbox looking for their check.

With any luck, it will already be sitting there in their bank account.

For an overall look at the government’s paperless transition, check out this MainStreet article on the government switch to direct deposit.

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