IN OCTOBER, EVERYONE on welfare in King County received a shiny new debit card in the mail. Now, instead of using paper food stamps at the grocery store or cashing a welfare check at the bank, people can swipe their Quest cards at the checkout counter or use them at an ATM. The point of the cards is to reduce fraud (there's an entire black market established around the selling of paper food stamps), speed up the delivery of benefits (no more waiting for checks), and eliminate the stigma of paging through a book of stamps while a line of shoppers looks on.

But there are also some pretty serious drawbacks. The system actually costs welfare recipients money. Each time they use an ATM to draw from their accounts (the only way their money can be accessed), Citigroup, the financial giant running the program, takes a little off the top. In Washington, the typical mother-and-child household receives $440 a month in cash benefits, putting them 60 percent below the poverty line. Yet each time Mom uses an ATM, she pays 85 cents to the nation's largest bank, New York-based Citigroup. If she's using an ATM run by Key Bank, Bank of America, or U.S. Bank -- all of which accept the card -- she's also charged the banks' standard $1.50 transaction fee. "That's their laundry money," says Monica Peabody of the Welfare Rights Organizing Committee in Olympia. "These grants are so low already, and every penny is spent. It's outrageous."

Meanwhile, Citigroup, which last week announced third-quarter profits of nearly $100 million, stands to make a bundle. The bank's system is already in place in some Washington counties, as well as in 27 other states -- dispensing more than $640 million in benefits to 12 million people. The state pays Citigroup $60,000 for dispensing benefits in King County, and though the company wouldn't reveal how much it makes off ATM fees, a little math shows that it'll collect tens of thousands of dollars each month in this county alone.

The cards -- which came about because of a federal mandate to make all government payments electronic by 1999 -- also make it easy for the state to keep a detailed tally of purchasing habits. This data could conceivably be used to cut off benefits if it's determined the money isn't being spent correctly, or could be used in child welfare cases, when the mother's caretaking abilities are in question.

Renia Neuhauser, director of the card program for the state's Department of Social and Health Services (DSHS), says the cards provide a useful tracking system. If a client stops using their card, she says, Citigroup notifies DSHS. "What if the client is ill and we haven't seen them for a while?" asks Neuhauser. "What if they don't need them anymore? Or don't know how to use them? We need to know what's going on with our clients. This is an alert system."

But with the ability to track comes the ability to spy. "When you use a credit card, a debit card, or a retailer card at the store, there are no laws that prohibit the store or the card company from selling that information," says Jerry Sheehan, a lawyer with the American Civil Liberties Union of Washington. "With regard to persons on public assistance, now you're allowing the government to receive a record of your spending." Because there are no waivers for people who'd rather not use the Quest card, "the government is not allowing you to have anonymity in your purchases."

Citigroup regional director Tom McLaughlin says the bank only releases vender serial numbers and transaction dates to DSHS. But he admits that a caseworker could pretty easily track down retailer names and locations. He says even more information will be available to DSHS as stores like K-Mart, Costco, and Wal-Mart start accepting the cards. "Those retailers who want the clients' business will tend to take these cards," he says.

In the end, detailed records of shopping habits could become fodder for politicians looking to reduce government subsidies. "Legislatures are always disrespectful of the privacy rights of those they think ought to be grateful for assistance," says Sheehan.