Banking Blog

Finance Blogs » Banking Blog » Chase glitch hits food stamps

Chase glitch hits food stamps

By Claes Bell ·
Tuesday, November 20, 2012
Posted: 3 pm ET

Last week, millions of people had their cards declined at grocery stores across the U.S., thanks to a computer glitch at JPMorgan Chase & Co. The twist? Those cards weren't debit cards or credit cards, they were government benefit cards.

These days, most government benefits from programs like Temporary Assistance for Needy Families, commonly referred to as welfare, or the Supplemental Nutritional Assistance Program, commonly known as food stamps, are loaded on to electronic benefit transfer, or EBT, cards rather than distributed as paper checks or coupons.

If you've ever seen someone use an EBT card or have used one yourself, you know that it looks almost identical to a debit card. Like debit cards, they're swiped at terminals. Users have to enter a PIN. Then, the transaction is processed electronically.

In a lot of states, that last part is handled by Chase, which is contracted by 24 state governments through a subsidiary called JPMorgan Electronic Financial Services to administer the EBT cards.

Unfortunately, a computer glitch at Chase on Friday morning spelled trouble for EBT card users in 10 states, including Florida, New York, Pennsylvania, Georgia, South Carolina, Indiana, Kentucky, Connecticut, West Virginia and Delaware. All told, that meant no access to benefits for about 7 million SNAP beneficiaries in those states.

Mike Feusco, a Chase spokesman, says technical teams began working on the problem as soon as they noticed something was amiss.

"We have technical teams monitoring our programs around the clock," Feusco says. "We caught it as soon as it occurred, and we worked very quickly to resolve it.

Still, it took six hours to resolve the problem, he says.

Feusco was quick to emphasize that the outage was isolated to JPMorgan's EBT systems.

"It did not affect debit, credit or any other cardholders," Feusco said.

Nevertheless, I think it's fair to say the incident underscores the fragility of today's high-tech systems of payment. Cash and checks may be clunky and inconvenient, but their ability to conduct transactions isn't contingent on the smooth functioning of massive networks run by far-off banks of servers.

I'm a big fan of electronic payments, but imagine if something similar to this incident happened to a major bank's payments systems that went down at a particularly bad time, say Black Friday, or suffered an extended outage, rendering debit cards and credit cards useless. Not good.

What do you think? Are today's payment systems too fragile?

Follow me on Twitter: @ClaesBell

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
November 21, 2012 at 8:51 pm

A simple solution would be to set up distribution centers instead of SNAP cards, give out beans,rice,cheese, eggs, milk the basic staples. If they can get to the grocery they can get to a distribution center. It would cut down on abuse and fraud.

November 21, 2012 at 8:48 pm

A simple solution would be to set up distribution centers instead of SNAP cards, give out beans,rice,cheese, eggs, milk the basic staples. If they can get to the grocery they can get to a distribution center. I would cut down on abuse and fraud.

November 21, 2012 at 8:37 pm

7 million really does any one work ???? to bad work

November 21, 2012 at 8:22 pm

I recently watched a well dressed obese woman with a high dollar hairdo and nail job use her $400 smart phone to tally up her grocery bill that included $150 of jumbo shrimp. As I stood in line behind her with a bag of dried beans in one hand and a bag of rice in the other all I could was shake my head when the cashier rang up $460. The cashier saw my dismay and said the poor soul only had $600 left on her card.

November 21, 2012 at 6:46 pm

I have no problem with people using and getting assistance when they need it. I, myself have had to use assistance before, but see the difference in me and lot of our society is I used it only for the time I needed it and then I (my family) started back support ourselves. I have a problem with people who multiply only to get more from the people who are working everyday to support thier self and these types of programs by paying taxes. It makes me angery to see ppl in line in front of me with two or three buggies full of food and when they exit the store they get into a brand new car and also have 4-6 kids they have to load up first. So I think they need to put a limit on how long you can live on the system before your free ride runs out.

November 21, 2012 at 4:17 pm

What is wrong with you guys that you just don’t see the connection between people needing to be on these assistance programs and job loss in this country.
I’m not even talking about all the Jerry Springer baby-mama’s out here OK. I totally agree with you, a lot of these people need to be cut off after having one dependant. But having Three, Four, Five, that is beyond ridiculous. Time for responsibility to kick in on that subject.
These banks are getting way out of line, calling themselves green promoters offering us all these newer ways to bank online. Take a picture of a check, “It’ll go straight to your account”. Do everything online. What they really are doing is getting us ready for the new really…The final insult against us humans beings..”Welcome to 666”. We’re already well on the way.
Check out how many businesses have already relocated their offices to other states, or outsourced them off shore…”America is hemorrhaging from the inside out”. Our people are being put out to pasture like a bunch of sheep, yet most of our leaders are bed with all these various banks and corporations doing this to us. And don’t start doing dumps on this being Obama’s fault; It’s much bigger than that.
People have no idea how much money Chase makes off of loading these cards for Americas needy; They are making bank, or they wouldn’t be in the business.

November 21, 2012 at 3:33 pm

Why not shut down the free-money-for-losers program altogether....FOREVER!

Oh yeah, nobody wants that. Look at the election results.

November 21, 2012 at 3:32 pm

Why not shut down the free-money-for-losers program altogether....FOREVER!

November 21, 2012 at 3:19 pm

I saw a video clip making round in the e-mails of my super conservative friends - where a student was misusing his grant for housing and was given a 3rd degree by Judge Judy.

A card payment does cut down on these types of misuse. Few hours of inconvenience is nothing compared to days of hunger.

I support card payment as opposed to cash or cheque.

Sick And Tired
November 21, 2012 at 3:11 pm

A six hour inconvenience is no big deal!