What Is Electronic Benefit Transfer (EBT)?

Electronic benefit transfer is a card-based system similar to a debit card that allows recipients of government assistance such as food stamps to pay retailers directly for their purchases. State governments provide benefits and track their use via the EBT system.

The EBT system has been in place since 2004 for payments through the Supplemental Nutrition Assistance Program (SNAP) in all 50 states, while its use is being phased in for other government nutritional programs.

Understanding EBT

Benefits recipients are issued a plastic payment card with a magnetic strip and a PIN. In addition to SNAP, programs using or being tested for use of EBT include the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC); Temporary Aid for Needy Families (TANF), and some state general assistance programs.

Key Takeaways

  • Through the EBT program, recipients of nutrition assistance are issued an electronic card similar to a debit card for payment of benefits directly to retailers.
  • The EBT has replaced the old-style color-coded paper food stamps.
  • Some states have incorporated other public assistance programs into the EBT systems they administer.

Cash and food stamp benefits are deposited into electronic benefit accounts which can be accessed using a PIN number. The card can be used at EBT participating merchants as well as at ATM machines and point-of-sale (POS) terminals.

How EBT Was Implemented

The Food Stamp Program was renamed the Supplemental Nutrition Assistance Program by Congress in 2008. Its programs are funded by the federal government but administered by the states, which work with contractors to procure their own EBT systems for delivery of SNAP and other state-administered benefit programs.

When a recipient is approved for benefits, the state's EBT contractor establishes an account and the recipient's SNAP benefits are deposited electronically in the account monthly.

All states now have systems that use cards with magnetic stripes and online authorization of transactions. The processor verifies the PIN and the account balance and sends an authorization or denial back to the retailer.

The card system is used by all SNAP benefit recipients and is being phased in for other benefits programs. The details vary by state.

The recipient's account is then debited for the amount of the purchase, and the retailer's account is credited. No cash changes hands. No surcharges, sales taxes, or "processing fees" may be added to the accounts by federal law.

Payment is made to the retailer at the end of each business day.

The Old System

The old Food Stamp Program used paper stamps or coupons in color-coded denominations including $1 (brown), $5 (blue), and $10 (green). In the late 1990s, the stamps were phased out in favor of the EBT system.

Many states expanded their use of the EBT card to include other public-assistance programs.

The 2008 Farm Bill renamed the Food Stamp Program as the Supplemental Nutrition Assistance Program and replaced all references to stamp or coupon in federal law to card or EBT.