That means taxpayers without bank accounts who want their cash ASAP can choose direct deposit. Additionally, if they e-file their tax return, the IRS will send the tax refund back in as little as 10 days, according to the agency's website.
States such as New York, Georgia, Louisiana, Oklahoma, Connecticut and South Carolina also give taxpayers the option of receiving state tax refunds on prepaid debit cards issued directly from the state. Check with your state's tax or revenue department online to find out.
A budget helper?
Have a special project in mind for that tax refund but worried the money will disappear quickly amid your everyday purchases? Putting an income tax refund on a prepaid debit card is one way to keep the money separate from other accounts.
"You might not want to dump it into a bank account because it might get lost in day-to-day charges," says Ben Jackson, a senior analyst of Mercator Advisory Group's Prepaid Advisory Service.
Of course, there are other ways to keep your tax refund from commingling with your other money. Consider depositing the refund into a savings account you don't use.
Or put the tax refund into a short-term certificate of deposit. Your refund will earn interest (though not much in this interest rate environment), and you won't be tempted to withdraw money before the term is up because you will likely pay a penalty. It's a good way to keep undisciplined budgeters from spending earmarked money.
Watch out for fees
The biggest downside to receiving your income tax refund on a prepaid debit card is the myriad fees that come with the cards.
"You have to pay to access your own money," says John Ulzheimer, president of consumer education at SmartCredit.com. "You're going to see your hard-earned tax refund nickeled and dimed to death with fees."
A prepaid card can feature an enrollment fee, a monthly maintenance fee, ATM withdrawal fees, ATM balance inquiry fees and a fee to convert the remaining balance into a bank check, among others.
"If you have a bank account, there's no advantage whatsoever to getting your tax refund on a prepaid card," says Joe Ridout, consumer services manager for Consumer Action, a San Francisco-based consumer advocacy group. "You needlessly would forfeit some of your tax refund with the fees that come with these cards."