Government Report Highlights Disproportionate Impact on Vulnerable Families

October 1, 2024 A new report from the U.S. Consumer Financial Protection Bureau (CFPB) reveals that the shift to cashless payment systems in school cafeterias has had an unintended consequence: increased costs for lower-income families. As more schools transition to cashless systems, many districts have partnered with payment processors that charge transaction fees, which can disproportionately impact those living at or below the poverty line.

The CFPB report found that some payment processors charge fees as high as $3.25 per transaction, or 4% to 5% of the amount loaded. While schools are legally required to offer fee-free payment options, such as cash or check, many do not, and transparency about these alternatives is often lacking.

In a review of 300 of the largest public school districts in the U.S., the CFPB discovered that 87% of sampled districts contract with third-party payment processors. For families on tight budgets or those receiving free or reduced-price lunch, every dollar matters. Paying a fee on each transaction means these families are paying the equivalent of a school lunch just to load money onto their accounts.

“It’s unconscionable that families qualifying for free or reduced-price lunch are paying as much as 60 cents on the dollar in transaction fees when paying electronically,” said Mark Weller, Executive Director of Americans for Common Cents.

For lower-income families who can only afford to load small amounts at a time, these fees can add up quickly—sometimes on a weekly or even more frequent basis—exacerbating financial strain.

Weller stressed that while the use of digital payments is on the rise, cash remains the most cost-effective payment option, particularly for families who cannot afford the fees associated with electronic payments. “Cash is still vitally important for those who cannot bear the burden of transaction fees, and it remains the cheapest and most accessible form of payment.”