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Tax refund debit cards debut

By Kay Bell · Bankrate.com
Thursday, January 13, 2011
Posted: 3 pm ET

Paying a tax bill with a credit card has long been an accepted practice by American taxpayers.

Now Uncle Sam is working to expand plastic tax practices. This time, though, he wants people without bank accounts to try the federal government's new Visa debit card as a way to receive their tax refunds.

Just in time for the tax filing season, the Treasury Department has launched a pilot program targeting 600,000 low- and moderate-income individuals across the United States as potential users of a federal MyAccountCard prepaid Visa debit card.

With this card, says the Treasury in announcing the program, taxpayers will have a "safe, convenient and low-cost financial account for the electronic delivery of their federal tax refunds."

In addition, said Deputy Secretary of the Treasury Neal Wolin in the statement detailing the program, the debit card also "can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely and conveniently, giving users more control over their financial futures."

Right now, however, the big draw is tax refunds.

Folks without bank accounts often must pay a service charge to cash refund checks. And because they don't have an account into which the tax refund can be directly deposited, they must wait for the paper check to arrive via mail.

Or, if they don't want to wait, they get a refund anticipation loan. A speedy direct deposit onto the debit card could be yet another blow to these costly tax-related loans. Yes, that's me you hear cheering over your Internet connection.

The debit cards will offer its owners mostly free services. They include no charge for the addition of a refund amount to the card, as well as free point-of-sale transactions, free online bill pay, free cash withdrawals at more than 15,000 ATMs nationwide and free cash back at participating retail stores.

Some other uses, however, such as out-of-network ATM usage or having other funds loaded on the card, will render a fee.

The Treasury actually is randomly sending out four different types of cards in this pilot:

  1. Card with no monthly fee and no linked savings account
  2. Card with no monthly fee and a linked savings account
  3. Card with a $4.95 monthly fee and no linked savings account
  4. Card with a $4.95 monthly fee and a linked savings account

The options, says the Treasury, will help it "evaluate which product features, fee structures and marketing messages generate the greatest positive response from taxpayers." And those results will determine whether it's worthwhile to make a debit card account "an integrated part of the tax filing and refund process" for all taxpayers.

The MyAccountCard Visa will be issued by Bonneville Bank, with additional services provided by Bonneville Bank through its program manager, Green Dot Corp., a prepaid financial services company.

Get all the latest tax news and tips this filing season by subscribing to Bankrate's free Daily Tax Tip newsletter.

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6 Comments
MJB
February 17, 2011 at 7:37 pm

I'm sure the day will come when all refunds are electronic refunds of some type. I don't generally like to receive gifts, bonuses, or tax refunds on prepaid debit cards. Most cashiers don't understand how to use them so you either have to make a purchase for the exact amount on the card, which is fairly hard to do, or you lose some of the money. Of course, the banks love them, especially if they get a $4.95 monthly fee. I can't say that I support this. The banks will lobby for the $4.95 fee option, the poor who often don't have banks in their neighborhoods will be forced to give part of their refund to the banks for this privilege. Require a savings account of the individual's choosing, require electronic refunds = better option.

Shantique
January 14, 2011 at 9:13 am

Oh, yeah...let's not forget to mention this encourages people to go right out and SPEND that money (since many studies have shown, swiping a card makes people feel like they are not spending at all).

Another thing the government likes to do, make people think they are being HELPED, when really it's a ploy to try to make the bottom classes throw their money at the economy, to fix all the mistakes the GOVERNMENT has made.

Another word...DISGUSTING.

Shantique
January 14, 2011 at 9:10 am

"the Treasury Department has launched a pilot program targeting 600,000 LOW- and MODERATE-INCOME INDIVIDUALS across the United States as potential users of a federal MyAccountCard prepaid Visa debit card."

The Treasury actually is RANDOMLY sending out four different types of cards in this pilot:

Card with no monthly fee and no linked savings account
Card with no monthly fee and a linked savings account
Card with a $4.95 MONTHLY FEE and no linked savings account
Card with a $4.95 MONTHLY FEE and a linked savings account

This sounds like a nightmare wating to happen. Some of those people don't have bank accounts because they can't handle them and often don't understand the terms and conditions, preferring to work with cash. Now the GOVERNMENT (again, sticking their nose where they shouldn't)is going to send these same people "MONEY CARDS"?!? And ones that carry possible FEES, no less!

One word...SHAMEFUL.