By Jonathan Pierce, banking-industry analyst covering prepaid cards and government payment systems for 10 years
Last reviewed: July 24, 2026
About 21.6% of unbanked U.S. households used prepaid cards in 2023, according to the FDIC’s 2023 National Survey of Unbanked and Underbanked Households. Direct Express occupies a distinct part of that market: it converts federal benefits into a prepaid card balance for recipients who may lack a checking or savings account.
The program is now moving from its long-standing Comerica servicing structure to Fifth Third Bank. New Direct Express enrollments began going to Fifth Third on May 18, 2026, while existing accounts are scheduled to move in stages.
Direct Express is not a typical retail prepaid card
Direct Express is a Treasury-sponsored Debit Mastercard account used to receive qualifying federal payments electronically. Treasury lists Social Security, Supplemental Security Income, and veterans benefits among the payments that may be deposited into the card account.
A general-purpose prepaid card is ordinarily purchased or funded by its user. Direct Express is different because its primary funding source is a federal payment issued by a government agency.
The account also serves a public-policy function. Federal benefit recipients generally must receive payments electronically through direct deposit at a bank or credit union or through a prepaid option such as Direct Express.
That makes the product both a card and a delivery system.
Its competitive position cannot be measured only through rewards, app ratings, or ATM features. Reliability matters more because failure can interrupt access to money intended for basic monthly expenses.
What FDIC prepaid-card data shows
The FDIC’s 2023 National Survey of Unbanked and Underbanked Households found that prepaid-card use was disproportionately concentrated among households without bank accounts. 21.6% of unbanked households used prepaid cards in 2023, compared with a substantially smaller share of banked households.
A separate FDIC analysis, “A Closer Look at the Unbanked: Cash-Only Households Versus Those That Use Prepaid Cards or Nonbank Payment Apps,” reported that approximately 32.9% of unbanked households had used a prepaid card under its broader measurement of transaction-product use. Nearly 18.2% had used a nonbank payment app.
The percentages differ because the publications use different measures and analytical groupings. They should not be treated as contradictory estimates of one identical behavior.
The longer trend is clear. Prepaid cards remain far more relevant among unbanked households than among households already connected to mainstream banking.
Prepaid access in FDIC data
| Measure | Published result | Named source |
|---|---|---|
| Unbanked-household prepaid-card use, 2023 survey measure | 21.6% | FDIC 2023 Household Survey |
| Unbanked households using a prepaid card in broader FDIC analysis | 32.9% | FDIC “A Closer Look at the Unbanked,” 2024 |
| Unbanked households using a nonbank payment app | 18.2% | FDIC “A Closer Look at the Unbanked,” 2024 |
| Unbanked-household prepaid-card use in 2021 | 32.8% | FDIC 2021 Household Survey |
| Banked-household prepaid-card use in 2021 | 5.7% | FDIC 2021 Household Survey |
| Unbanked-household prepaid-card use in 2015 | 27.1% | FDIC 2015 Household Survey |
The 2021 FDIC National Survey of Unbanked and Underbanked Households reported that 32.8% of unbanked households used general-purpose reloadable prepaid cards, compared with 5.7% of banked households.
The 2015 FDIC household survey had found prepaid-card use among 27.1% of unbanked households, 15.4% of underbanked households, and 6.9% of fully banked households.
Those figures show that prepaid cards have remained an established financial tool for households outside conventional banking, rather than a temporary substitute that disappeared as mobile payment apps expanded.
Direct Express has a narrower funding model
A retail prepaid card may accept cash reloads, payroll, transfers, or deposits from several sources. Direct Express is primarily designed to receive federal benefit payments.
That restriction reduces some complexity. It also increases dependency.
A cardholder cannot necessarily replace a delayed or interrupted benefit deposit with ordinary cash loading through a retail network. When the federal payment does not arrive, the issue must be separated between the paying agency and the account servicer.
Treasury manages the program framework. The federal benefit agency determines whether a payment is issued. The financial agent maintains the card account and transaction services. Mastercard provides the payment network.
Four systems can touch one recipient’s monthly income.
This arrangement is efficient at national scale, but it can be difficult for an individual cardholder to determine which institution owns a particular problem.
The financial-agent model concentrates operational risk
Treasury does not maintain Direct Express as an internal retail bank. It appoints a private financial institution to act as a financial agent of the United States and administer the card portfolio.
In January 2024, Treasury sought a new financial agent because the agreement with the existing agent was scheduled to end in January 2025. The solicitation said the selected institution would manage the Direct Express portfolio and offer emerging electronic-payment services.
Treasury announced BNY as the selected financial agent on November 21, 2024, under a proposed five-year agreement beginning January 3, 2025. The release described a phased customer migration.
That arrangement did not become the final current structure.
SSA and its internal operating instructions now identify Fifth Third as the program manager. New enrollment requests began going to Fifth Third on May 18, 2026, while existing customers are to transition later.
The sequence reveals an underreported feature of the program: Direct Express depends on a concentrated institutional relationship that can change through federal selection, bank acquisition, or revised transition plans.
The cardholder does not choose the financial agent.
That differs from ordinary consumer banking, where a dissatisfied customer can theoretically move to another institution. Direct Express users can switch to direct deposit at another financial institution, but many enrolled recipients use the program precisely because they do not maintain another account.
Where the “competitive market” description breaks down
Prepaid cards exist in a competitive retail market, but Direct Express itself operates more like a federally appointed utility.
The financial agent competes to win the Treasury role. Individual beneficiaries do not shop among several Direct Express issuers.
Once an institution is selected, a large cardholder population is administered under the resulting agreement. The market competition happens mainly at the procurement stage rather than at the consumer checkout stage.
This changes the incentives.
A conventional prepaid-card company can lose customers quickly if pricing or service deteriorates. Direct Express cardholders may face higher switching friction because moving away from the program requires establishing another eligible electronic-payment destination with the paying agency.
The headline benefit is broad access. The fine print is limited consumer choice within the program.
Fees are designed around essential access
Treasury says Direct Express has no enrollment fee, monthly account-maintenance fee, minimum-balance requirement, or credit check. Cardholders can make purchases, obtain cash back with a purchase, and access cash through participating financial institutions under the program’s rules.
The ATM benefit is specific rather than unlimited. Treasury provides one program-fee-free ATM withdrawal for each federal deposit posted during the month. An ATM operator may impose a separate surcharge.
This fee design reflects the account’s purpose. A monthly maintenance charge would reduce federal benefit funds merely because they were delivered through the government’s selected prepaid channel.
Optional actions can still cost money. The applicable card agreement may charge for additional ATM activity, bank transfers, replacement services, expedited delivery, or international transactions.
The interpretive conclusion is clear: Direct Express protects basic receipt and ordinary spending from recurring program charges, while placing more of the cost on optional or higher-service activities.
That structure is less expensive than many retail prepaid cards, but it is not a universal zero-fee account.
Scale increases the consequences of migration errors
SSA’s May 2026 notice says new enrollments are now routed to Fifth Third, while existing Direct Express cardholders will begin moving later in 2026 or early 2027. Existing Comerica-issued cards should continue to be used until cardholders receive transition instructions.
A phased transition is safer than converting every account on one date. It also extends the period during which two operating environments coexist.
During that period, users may encounter:
- Different card-number ranges
- Separate apps
- Different account websites
- Different customer-service numbers
- New registration requirements
- Replacement-card communications
The system can be functioning as designed while appearing inconsistent to the public.
That matters because the affected population is not composed only of highly engaged mobile-banking users. Direct Express was built specifically for people who may lack mainstream financial accounts, and some recipients may also face age, disability, language, connectivity, or device-access barriers.
A small error rate multiplied across a multimillion-card portfolio can affect a large number of benefit recipients.
Prepaid cards versus nonbank payment apps
FDIC research shows that unbanked households increasingly use both prepaid cards and nonbank payment apps. In its 2024 analysis, the FDIC reported prepaid-card use among 32.9% of unbanked households and nonbank payment-app use among 18.2%.
The products solve different problems.
A payment app generally requires another funding source, such as a linked card, bank account, or incoming person-to-person transfer. Direct Express acts as the initial destination for the federal payment itself.
That gives Direct Express a more foundational role. A recipient could potentially connect the card to another supported service, but the federal benefit still needs an original electronic landing point.
Direct Express is therefore closer to an account layer than an app layer.
Nonbank apps compete on convenience and network effects. Direct Express competes less visibly on reliability, access, government compliance, and the ability to serve people without another deposit account.
Consumer protection is split across frameworks
Direct Express operates as a prepaid account, but its protections arise from several sources.
Treasury sets program requirements. The issuing bank holds the account funds. Federal electronic-transfer protections govern qualifying errors and unauthorized transactions. FDIC insurance may protect eligible deposits if the insured bank fails.
These protections cover different events.
Deposit insurance does not settle a merchant dispute. An electronic-transfer investigation does not determine whether Social Security issued the correct benefit amount. Mastercard acceptance does not guarantee that every ATM will dispense the requested amount without a surcharge.
The structure is layered rather than unified.
That layered protection can be strong, but the cardholder must reach the correct institution and use the applicable process within required timeframes.
Where Direct Express data remains thin
Public sources provide program descriptions, household prepaid-card usage, transition dates, and selected enrollment estimates.
They do not provide a detailed annual Direct Express performance report with:
- Active accounts by benefit type
- Average monthly account balance
- Transaction volume
- ATM usage
- Customer-service wait times
- Dispute rates
- Fraud-loss rates
- Replacement-card delivery performance
- Account restriction frequency
- Fee revenue
That absence prevents a complete market comparison.
Retail prepaid providers may publish pricing and limited operational metrics, while public companies disclose selected financial information in SEC filings. Direct Express sits between government and private banking, leaving much of its program-level operating data outside normal consumer-market reporting.
The result is an accountability gap. The public can see how the product is supposed to work more easily than it can measure how consistently it works.
What the Direct Express model proves
Direct Express demonstrates that a prepaid account can deliver federal income at national scale without requiring every recipient to open a checking account.
It also demonstrates the limits of treating prepaid access as full financial inclusion.
A cardholder gains electronic receipt, debit purchases, and cash access. The person may still lack savings products, credit access, a branch relationship, checks, broader transfer tools, and the ability to choose the institution administering the government card.
The program is effective at solving a defined payment problem.
It is not the same as entering the mainstream banking system.
Data limitations
FDIC surveys measure household behavior, while Direct Express serves individual cardholders. The percentages cannot be converted into an estimate of how many Direct Express users are unbanked without Direct Express-specific demographic data.
FDIC measurement also varies by survey question. The 21.6% prepaid-card figure in the 2023 Household Survey and the 32.9% figure in the broader 2024 cash-only analysis describe related but nonidentical measures.
Transition facts are changing quickly. The current source of truth is the May 2026 SSA notice and operating instruction identifying Fifth Third and the May 18 enrollment change.
Older Treasury material naming BNY is historically important but no longer describes the current incoming servicer.
Frequently asked questions
Is Direct Express a prepaid card?
Yes. It is a Treasury-sponsored prepaid Debit Mastercard account used for qualifying federal payments.
How common are prepaid cards among unbanked households?
The FDIC’s 2023 survey reported prepaid-card use among 21.6% of unbanked households under that survey measure.
Is Direct Express part of the retail prepaid-card market?
Partly. It uses prepaid-card infrastructure, but the financial agent is selected by Treasury rather than individually chosen by each cardholder.
Why is Fifth Third involved now?
SSA says new Direct Express enrollments began moving to Fifth Third on May 18, 2026, with existing accounts transitioning later.
Was BNY previously selected?
Yes. Treasury announced BNY under a proposed five-year agreement in November 2024, but newer SSA materials identify Fifth Third as the current program manager.
Does Direct Express charge a monthly maintenance fee?
Treasury says it does not. Optional services and third-party ATM charges can still apply.
Does Direct Express provide full banking access?
No. It provides an account for receiving and spending federal benefits, but it does not reproduce every savings, lending, branch, and payment service available through a conventional bank relationship.
Direct Express succeeds because it narrows the problem: receive the federal payment, place it in an accessible account, and provide a debit card. Its market weakness comes from the same narrowness, since millions of recipients remain dependent on one government-selected servicing structure for access to essential income.
