US Government Shuns Checks as GAO Highlights $43 Billion in Card Payments

In March, President Donald Trump signed an executive order that mandated a shift away from paper checks for government-related transactions.

Disbursements from federal agencies, payments to those agencies and transactions across supply chains will be done via direct deposit, debit and credit cards and electronic fund transfers.

A report from the Government Accountability Office offered a glimpse into the benefits and the costs tied to that shift, delving into the operational efficiencies and fees paid as agencies accept card payments.

All told, the data, which encompasses activity during 2023, showed that credit, debit and prepaid cards accounted for roughly 743 million transactions, tied to more than $43 billion in payments collected by over 85 federal entities.

Higher Satisfaction

The agencies that accept card payments have been bolstered by higher customer satisfaction, according to the report. In addition, with a nod to the use of cards as part of work-related purchases made by employees of those agencies, benefits “include lower administrative costs, such as those for cash advances, and closer tracking of employee spending to help prevent fraud. Also, payment cards provided through the GSA SmartPay program generate spending-based refunds, which totaled $488 million in [fiscal year] 2023 based on net eligible funds of $37 billion spent.”

“The entities in turn paid about $784 million in fees ($1.06 on average per transaction) to card issuers, networks and companies that facilitated the transactions,” the report said. “Fees paid amounted to 1.8% of revenue (which falls within the range of published industry estimates for U.S. merchants).”

There’s some indication that agencies have taken steps to cut down on costs, as the report said five of the selected federal entities told the GAO that they reduced fees by meeting transaction volume thresholds.

“One entity limited the types of payment cards accepted for certain transactions, and another limited transaction amounts,” the report said.

Breaking down the fund flows, $18.6 billion of the $43 billion in payments were transactions linked to the Treasury Department. Per the report, “accepting cards helps reduce the administrative burden of handling cash and checks.”

A few agencies have seen a wholesale shift away from cash and checks, as the report found that two agencies said “90% or more of their sales come from credit or debit cards, and Amtrak officials also said cards account for over 90% of ticket sales revenue. Accepting cards online further enhances customer convenience.”

Digital Disbursements

The embrace of cards also helps pave the way for improved experiences for both sides of the coin — not just payments to government agencies, but from them as well — in the form of digital disbursements directly onto debit cards and into bank accounts, as PYMNTS Intelligence reported in December.

“Accelerating Aid: Digital Payouts for Government Disbursements” found that digital channels reduced fraud and that, in terms of satisfaction, there’s room for improvement, as 45% of government officials rated their payment experiences as “fair” at best.

Meanwhile, “The State of Digital Disbursements: Why Consumers Prefer Instant Payments” revealed that push to debit is a favored payment method for disbursements, including from government agencies. The fact that government agencies will be linking to FedNow® Service would satisfy consumers’ preference for instant payouts, as 94% of consumers given the choice of instant payments vocalized high satisfaction with that payment option.