SNAP Prepaid Cards: Operating on a Restricted Network

The United States government provides cash payments through social welfare and benefit programs to qualified citizens. Social welfare programs are subject to a means test based on low income, such as Supplemental Security Income, Supplemental Nutrition Assistance Program (SNAP), Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and Temporary Assistance for Needy Families (TANF). Social benefit programs include Social Security, veterans benefits, unemployment insurance, and workers compensation. The U.S. government generally requires distributions to be made electronically through the ACH process or a payment card. Paper checks are exception items.

The federal government spent $1.2 trillion on 80 welfare and benefit programs in 2022. This represents 20% of federal spending, or an average of $9,000 per household. These programs distribute cash to families and individuals through various payment options and direct deposit methods. Payment cards and ACH payments displaced checks based on the Debt Collection Improvement Act of 1996, which mandated electronic funds delivery.

This report covers the Supplemental Nutrition Assistance Program (SNAP), previously called food stamps. Instead of using the branded payment networks of Mastercard and Visa, SNAP runs on an independent prepaid payment network functioning as a closed loop. SNAP operates as a restricted authorization network (RAN) that permits only certain transactions at specific locations, the antithesis of other government benefit programs that operate on the universal payment scheme, such as Social Security’s Direct Express Debit Mastercard. The design of the SNAP program, administered by the United States Department of Agriculture (USDA), ensures that purchases are explicitly made for family food.