The Treasury announced plans last week to create a pilot program that would bring special checking accounts for the unbanked and under-banked -- those who, for one reason or another, don't have checking accounts and operate strictly from cash. Such consumers are often the target of higher fees for check cashing, bill paying and other financial services, says Treasury spokesman Matt Anderson.
The as-yet-unnamed initiative will be timed to coincide with tax season. Via mailings and other means, the Treasury will offer the option of a direct deposit to a newly created checking account in lieu of a traditional paper check. After the refund is withdrawn, the accounts will live on to serve as basic checking accounts.
"We view this as an opportunity at tax time, when many individuals receive their largest payment in a given year, to introduce unbanked and under-banked individuals to mainstream financial products," Anderson says.
Treasury officials are still working on finding financial institutions to partner with, says Anderson, and the exact terms of the accounts still have yet to be worked out. One thing that's already been decided, says Anderson, is the accounts will rely on purchasing through debit cards. Account holders won't be able to write checks.
"(Check-writing) increases the overhead for the bank, which in turn makes the accounts more expensive, increases the chances of occurrences such as overdrafts, requires more security features," says Anderson. "The debit card, we believe, is an effective way to deliver the accounts to this population, expand the reach of mainstream financial products and reduce reliance on high-cost alternative financial products."
Also, many people the program is intended to help have been shut out of mainstream financial products because of bounced checks, a bad credit score or other financial missteps. Getting rid of checks could help reduce the risk posed to banks, making them more likely to accept lower fees and other favorable terms for the accounts.
Beyond debit cards, Treasury hopes to incorporate other mainstream checking features, such as bill pay and direct deposit, into the accounts, says Anderson.
What do you think? Is trying to bring people back into the mainstream banking system an important goal? Do these accounts sound like a good idea to you?