As the Morrison government seeks support to expand the cashless debit card to the Northern Territory, it has also rebooted calls for a national expansion of the card.

While the government has previously focused on the card as a policy to reduce what it calls “welfare-fuelled alcohol, gambling and drug misuse”, now it is also arguing that it is a “broad financial and budgeting tool”.

Those benefits are fiercely contested by welfare groups and Indigenous organisations, which say the card is discriminatory and not backed by adequate evidence.

So how does it work?

The card is operated by Indue and is currently being trialled in Ceduna in South Australia, East Kimberley in Western Australia, the Goldfields in WA and Hervey Bay in Queensland.

It quarantines 80% of a person’s income support payments. The money on the card cannot be used to withdraw cash from automatic teller machines or Eftpos terminals, or to buy alcohol, tobacco or gambling products. The rest is paid into their bank account as cash.

For example, Bundaberg resident Jodie McNally, 33, is on Newstart and is unable to work full-time due to a range of chronic illnesses. She told Guardian Australia she receives $532 a fortnight on the card and $133 that she can access in cash.

“It’s been absolutely terrible from the very start,” she said.

What is the government doing?

The Morrison government is currently trying to pass its planned expansion of the cashless debit card to the NT. Welfare recipients in the NT are already on the far-more restrictive Basics card, which was introduced under the Intervention 12 years ago and quarantines 50% of their income. This split will stay in place for NT cardholders.

At the same time, the social services minister, Anne Ruston, is spruiking what she says are the card’s benefits as part of what the government hopes might one day be a national rollout. “This card, because of technology, is now able to provide a broad financial and budgeting tool assistance to people,” she said recently.

The government has commissioned an independent report after an earlier study that found positive impacts was heavily criticised by an audit. It is yet to release the latest report.

What are the restrictions?

Obviously you can’t use the card in the cash economy – that is anywhere where there are no Eftpos machines. Examples often cited by critics include garage sales, fetes and roadside market stalls where cardholders say they could previously buy fruit and vegetables at cheaper prices.

The Australian Council of Social Service chief executive, Cassandra Goldie, said the card made it “harder for people to buy from op-shops, buy second-hand furniture, rent in shared accommodation or to provide children with money for school activities”.

McNally said the card had caused her issues renting in emergency accommodation and inhibited her ability to buy second-hand goods. For example, she said she had to borrow cash from a relative to buy parts to fix her car from a wrecker that only accepted cash. “What kind of a drug, or gambling or alcohol is that,” she said.

Some online retailers and eBay are also banned. To purchase second-hand products from Facebook Marketplace, McNally said she was required to take a screenshot of the advertisement in question and make an application to Indue.

“Then you take these forms to Indue and say, “Can I please buy this item? It can be four days until they decide whether you can buy it or not,” said McNally, who joined a protest against the card in Canberra this week.

In general, Indue currently blocks merchants rather than products. It provides a list of banned merchants, most of which are pubs and bars in the trial areas. The government says it is automatically accepted at about 900,000 businesses across the country. It notes that the card is also available at major retailers where alcohol is sold, such as Woolworths, Coles and Australia Post.

But cardholders have complained about having their cards declined at retailers that do not primarily sell these banned goods. One woman told of her humiliation of being denied at Just Jeans.

A Senate inquiry has heard claims that one mother who could not buy a children’s book from a bookstore was told her card was blocked because the shop also sold books on distilling alcohol.

In another alleged case, a nursing student on placement was unable to buy a stethoscope and university books from the Medshop. The submission claimed that Indue staff said she could not buy those things as she may be trying to buy hand sanitisers to drink.

How exactly are the banks involved?

The government has established a working group that includes the big four banks and some other financial institutions to make this happen. Coles and Woolworths have also provided advice to the government.

Asked by Guardian Australia about their work on the card, the big banks, Woolworths and Coles said they were only providing advice upon request from the government. None would say they supported the card. They are not being paid for their advice, they said.

The banks have been asked to provide technical advice on product-level blocking, meaning that items such as alcohol, gambling and cash withdrawals could be blocked when a transaction was made. In cases where a prohibited product is not sought, the card would work like any other, and could be used anywhere that Eftpos is available. While this already occurs at some major retailers, the aim is to extend this to small businesses.

Goldie said if they signed up to the “politicised and unproven cashless debit card [it] would do little to restore public confidence in the major banks”.

“The banks need to rule out working with the government on this stigmatising, impractical scheme, which would be a colossal waste of public funds,” she said.