Treasury Dept. To Offer Tax Refunds On Pre-Paid Debit Cards

We’ve been warning readers for years against “refund anticipation loans,” where tax preparers like H&R Block and Jackson Hewitt give you a pre-paid debit card now loaded with your expected return (minus fees and interest). And yet, these cards have continued to appeal to some lower-income taxpayers who don’t have bank accounts for direct-deposit of their returns. Now the federal government is providing these people with an alternative — a debit card that will accept the direct deposit.

“This pilot program will provide low- and moderate-income Americans with a low-cost option for faster delivery of their federal tax refund,” said Deputy Secretary of the Treasury Neal Wolin.

For this tax season, Treasury is only making the MyAccountCard (heaven forbid anyone put spaces between words) available to the 600,000 people it is notifying by mail in the coming week.

There will be varying monthly fees for having the card, ranging from free to $4.95. There is no fee for making purchases online or at retail merchants, adding cash by direct deposit, paying bills online or making cash withdrawals at one of the 15,000 in-network ATMs.

On the fee side, ATM withdrawals out of network will get you for $2.50 each (plus whatever charges are particular to that ATM); balance inquiries will be $.50. Adding cash to the card at an authorized retail location could cost you up to $4.95.

Do you think these cards could help steer people away from refund anticipation loans?

Treasury Launches Pilot Program of Prepaid Debit and Payroll Cards for Fast, Safe and Convenient Tax Refunds [Treasury.gov]

About MyAccountCard [MyAccountCard.gov]

Comments

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  1. mandy_Reeves says:

    it might….if it means getting the money faster.

    • esp13 has a pony named Steve says:

      These debit cards will most likely take the same amount of time as a direct deposit to your checking account which is 8-15 days of you e-file. refunds are deposited or mailed out each Friday. The cut-off to e-file is Thursdays before midnight. For example, if you e-file this Thurday, Jan 20th, you’ll get your refund direct deposited on Friday, Jan 28th (8 days). If you file Friday, Jan 21st, you’ll get your refund direct deposited on Friday, Feb 4th (15 days).

      You’re other options are mail-in + direct-deposit, mail-in + check mailed and e-file + check mailed. And of course, RAL, but that’s just if your an idiot or desperate.

  2. Hoss says:

    Great idea. Saves $$ for those that need it the most.

  3. dragonfire81 says:

    Doesn’t the government already make us jump through enough hoops to get our money? I want my entire refund without fees and finance charges and other junk. Either direct deposit or a paper check, always.

    • Loias supports harsher punishments against corporations says:

      Nothing is stopping you from getting your refund as a check. But, many people that do not have a bank prefer a pre-paid debit card.

      Slow your roll.

      • Stickdude says:

        If it’s constitutional to force people to purchase health insurance, why couldn’t we simply force everyone to open a bank account? The government then always has somewhere to direct deposit their money.

        Problem solved. :)

        • human_shield says:

          And take it out.

        • LadyTL says:

          Because there is a group of people through either bank error or financial misfortune that cannot open a bank account. If they try the banks will simply tell them they can’t because of some stupid interbank computer system.

    • danic512 says:

      These aren’t for you, read the article.

    • Talisker says:

      If you plan your withholding right you don’t need to jump through any hoops since the gummint never would have had your money to begin with.

      • FredKlein says:

        Some people use over-withholding as an enforced savings plan. In a way, it’s stupid (you could simply adjust your withholding so you are even, and put aside the extra money yourself in something interest-earning). But in a way it’s smart (if you never see the money, you won’t miss it and can’t spend it. And the interest you would earn is trivial).

  4. areaman says:

    “Do you think these cards could help steer people away from refund anticipation loans?”

    Not sure if the people who get bamboozled by H and R Block can be reasoned with. They might not be able to tell which is a better deal.

    • Red Cat Linux says:

      Granted that H&R, even individual tax advisers, are different – however my one experience with H&R block was a very positive one.

      I went to H&R with a very specific problem two years ago, explained why I needed help that year, and instead of doing what I expected, which is well, to do my taxes and charge me for their assistance, I spoke with a tax adviser for the better part of two hours.

      At the end of this she sent me off with knowledge of what and how I needed to file and the instruction that if I had any difficulty at all, I was welcome to come back and she would do my filing for me through H&R.

      So my one experience with H&R was with a human being. No, I didn’t have to go back. But if I had, I wouldn’t have a problem with it.

    • alana0j says:

      Just an FYI, H&R Block isn’t offering RAL’s this year due to issues with government regulations and the fact that they no longer use HSBC. They have an Emerald Loan, which you apply for (BTW only 20%-40% of people who apply are approved, strict credit check) and are either approved for $750 or $1000. It is not connected to your tax return in any way, and people can come in and apply for the loan without getting their taxes done. It carries a 36% interest rate, which seems super steep until you think of other places to get instant loans that usually have at least a 99% interest rate. There are no other fees with it or anything. Kicker with this loan is that it’s due back in 30 days, which I believe is the same as the original RAL was. Oh and the previous RAL couldn’t be offered to military, this one can.

  5. Loias supports harsher punishments against corporations says:

    I totally misunderstood that title to mean that if you get pre-paid debit cards from banks that money is tax deductible. I was aghast.

    After reading, it makes much more sense.

  6. danic512 says:

    This is a brilliant idea for those who are unable to get a bank account. Those folks on the margins get screwed on every step of a financial transaction and it’s nice to see then able to get a break.

    • Firethorn says:

      You know, this makes me wonder; what the heck is a ‘prepaid debit card’, if not a checking account that you can’t write checks on?

      You can pay bills with it, get cash with it, add money to it, etc…

      All you’d need would be a checking account number tied with it to make it a ‘restricted’ checking account valid for direct deposits of various sorts.

      And with the various fees that even this card charges, a $5 monthly ‘service fee’ would STILL be cheaper than paying .50 cents to check your balance, $4.95 to add money, $2.50 for an ATM withdrawal.

    • coren says:

      Sarcasm, right? It’s the equivalent of monday morning and my brain hasn’t kicked into gear yet.

      • danic512 says:

        I’m not being sarcastic at all. For folks on the margins, they normally have to go through check cashing places and they get nailed there. Then when they want to spend the money, many places won’t take cash, or won’t take it as easily or take it with additional costs.

        This is an effort to eliminate that and get a better return (in terms of helping the poor) on the tax money being spent towards this effort. This is better government efficiency.

        • esp13 has a pony named Steve says:

          Screwed at the the check-cashing joint, yes. But please enlighten me with the name of any establishment that low-income people frequent that will not accept cash.

        • coren says:

          It’s just that it seems they’re getting screwed pretty damned hard coming and going with this. Monthly fees, atm usage fees on top of the original atm fees, balance check fees, it’s loads of fun (for the banks)

          Also, who the hell doesn’t except cash? I know people have the option NOT to (in certain circumstances) but I’ve never actually seen it happen.

          • AustinTXProgrammer says:

            Electrical supply place two blocks from my office. They are primarily wholesale, but will sell to walk in retail customers. PO or credit cards only. No Checks (Sure they take them from their PO customers later) or cash.

            Apartments, although they aren’t going to accept these debit cards either.

            • coren says:

              I should have rephrased that to where would they take these but not cash. But t hat example you gave sounds bizarre to me. I wonder what the reasoning is?

          • danic512 says:

            Rental agencies often won’t take cash either. Plenty of monthly services require some sort of card or account to activate as well.

  7. misslisa says:

    Love the Smiths reference in the tagline :)

  8. jessjj347 says:

    Many times, low-income people will go to a check-cashing store to cash the refund check if they don’t have a bank account. Does anyone know how much these store charge? If it’s less than the fees on this card, than I don’t think this card is very helpful.

    P.S. I think H&R Block flubbed something up this year and can’t do the rapid anticipation loans.

    • MrEvil says:

      Check cashing places generally only charge 1%. Grocery stores and Wal-Mart are the same, though alot of grocery stores will refund the check cashing fee if you purchase over X amount in groceries.

      • kingofmars says:

        I should have done some research before inposted my comment. From a previous consumerist article, http://con.st/364102, it looks like the fees range from 1% to 4% depending on the size of the check.

        • jessjj347 says:

          So, I guess the answer is that check-cashing fees vary. For example, if a refund is $5000 (low-income earner maybe with kids and who gets earned income tax credit), then the fee might be anywhere from $50 – $200 +.

          Seems like the debit card could be worth it. Thoughts, anyone?
          I’m just apprehensive of the debit card, because generally it seems like consumers are unaware of the fees.

        • RvLeshrac says:

          In some states, there is no limit on fees.

          In Georgia, fees have historically ranged up to 10%, depending on the type of cheque.

    • kingofmars says:

      I think a check cashing fee is unreasonably high, like 10%. And considering many tax breaks are given to low-income families, I can see why the government would rather that go towards the families instead of it being skimmed off by a shady check cashing store.

    • mischlep says:

      Depends on the jurisdiction. New York is 1.83%, other states will vary.

    • YokoOhNo says:

      H&R Block missed their payment date for the bribe to be effective, i think.

    • RadarOReally has got the Post-Vacation Blues says:

      They did mess something up. They lost their permission to have a bank to make the loans. Even though their ads say “Loans up to $9,999″, in truth they’re only giving out loans of up to $1,000, since they have to fund it themselves. Odd I haven’t seen that on Consumerist, but I haven’t been vigilantly reading the last couple weeks.

      http://www.salon.com/news/feature/2010/12/27/us_h_r_block_tax_refund_loans

  9. Erika'sPowerMinute says:

    Can someone in the know explain to me how or why people don’t have bank accounts?

    • Veeber says:

      A lot of banks are changing the accounts to the point where it’s not affordable to have an account. Minimum deposits or number of transactions. They don’t make enough profit on them so they push them out with these fees.

      There’s also the “I don’t trust banks” mentality that my grand parents had. We found enough cash in their home after they passed, hidden behind drawers and cabinets we built 5 schools in China.

      • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

        I would think the Chinese already have enough of our money by now to build their own schools?

      • palfas says:

        This is the case for the target demographic.

        I remember the problems I had with my checking account when I was working a minimum wage job. One slight miscalculation and I got hit with all kinds of fees. Not to mention that it was a pain to have to deposit my pay checks in person. Some people are still stuck in this mess, and this card is for them.

    • uberbitter says:

      I don’t know of this is a widespread problem, but I do know of people who have overdrawn their bank accounts in the past or had bad credit and had a problem getting bank accounts. I imagine for some people transportation to banks in general or their bank in particular could be difficult.

      • uberbitter says:

        Also, illegal immigrants who don’t have fake SSNs can’t open accounts. This is why there are numerous check cashing places flourishing in my city. Not that tax refunds would matter for those people…

        • danic512 says:

          Uh, plenty of undocumented workers pay taxes. The IRS even gives them tax ID numbers without question. Furthermore, paying taxes is a point in favor of allowing folks to stay in the country.

    • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

      Because they somehow wound up on Chexsystems’ list of evildoers:
      http://en.wikipedia.org/wiki/ChexSystems

      And there’s a lot of people that can’t afford the fees of a lot of checking accounts:
      http://consumerist.com/2010/12/chase-cuts-off-free-checking-for-life-for-former-wamu-customers.html

      And, of course, illegal immigrants have no problems getting an refund check, but have a hard time getting a checking account. Not impossible, just more difficult.

    • Erika'sPowerMinute says:

      Kthx!

  10. Invader Zim says:

    What ATM is going to give all your money to you in one fell swoop. Dont they have daily transaction limits?

  11. nbs2 says:

    15,000 ATMs isn’t a lot of locations. Wired reported that there were 403,000 ATMs in the US as of August 2009. I’m guessing a lot of people are going to be paying the $2.50 fee. It may steer people away from those loans, but these cards aren’t the best deal either.

    A a related aside, where is the angry rhetoric we normally see whenever prepaid debit cards are mentioned, such as the many unemployment/welfare card stories? Have the Cardassians made us that numb to fees on these things?

  12. Mcshonky says:

    why doesn’t the government send out notifications to all americans in that category about the importance of having a bank account and how to evaluate what a good account for them might consist of.
    also show how paying all those fees for money orders is not cheaper, quicker or more convenient than even chase’s $6/month fee

    • Hoss says:

      That doesn’t help anyone that doesn’t need an account because they live paycheck to paycheck, those that distrust banking because of corrupt financial systems in their home country, etc.

    • OtakuboyT says:

      Who the heck would pay $6 month for a bank account?

      Maybe it’s the town I’m from, but neither the credit union or the county bank charge you anything you just need to have $25 to open and that’s it.

      • coren says:

        I agree with what you’re saying, but considering they would instead go for a card that costs 5 bucks amonth plus a bunch of other fees, 6 a month doesn’t seem that onerous.

    • LadyTL says:

      They can but it is a moot point for those of us on ChexSystems bad list. If you are you can not get a bank account anywhere.

    • djdanska says:

      I’m on social security disability and they actually do that. Before i was put on direct deposit, i got notices telling me where i can go for a free checking account just for being on disability. (My ss check was enough to get an acct). Even after i got on direct deposit, on statements and other various mailings i see things about getting direct deposit setup and how to get an account.

      Not exactly the same but i too get my social security on a prepaid card. I pay $7 a month for unlimited transactions, text message alerts, billpay services, and one thing that really comes in handy is my “bank” (netspend) put in direct deposits within 10 minutes of getting them. (In other words, i get my work check and ss/income tax refunds, 2 days or more early.)
      That in itself is worth it.
      No overdraft fees and as long as i get a direct deposit once a month, they let me go $10 over my balance.

      Best bank account i’ve had. (and i get a debit card with a pic of one of my pets on it.)

  13. Tim says:

    As long as you still give people the option to have direct deposit and/or a check, this can only be good. If you don’t have a bank account, take the card. If you do, take the DD.

  14. YokoOhNo says:

    Looks like the banks found their partner to help make up the fees the lost from the poor by taking advantage of the poor!

    Congress and Banks, beautiful together.

  15. zenmastertaz says:

    This is a conspiracy…. Sorry had to use that line. But in reality it seems like a perfect way to keep your money. Check out New Jersey’s fight “Reclaim” your gift card money…
    http://www.myfoxny.com/dpp/news/local_news/new_jersey/nj-gift-card-seizure-law-fight-continues-20110103-apx

  16. esp13 has a pony named Steve says:

    Those people who are usually getting Refund Anticipation Loans aren’t doing it because they don’t have an account. They do it becasue they are broke and they’ve been waiting for that $3000-$5000 refund since they ran out of money from the last RAL. They will easily give up $200-$300 to get a check the same or next day the tax preparer gives them an estimate, instead of paying $30 and waiting a week for an e-filed direct deposit. I think these IRS issued cards will still be the standard 8-15 day period offered when you do direct deposit. The big tax preparers have been offering their own pre-paid cards for sometime now, probably with much higher fees.

    • TooManyHobbies says:

      That’s mostly true, but there is a certain percentage of filers who don’t have bank accounts. It’s hard to believe, but they do exist.

      Some of the bank products available are already providing this to “the unbanked” as they’re called – the client gets an empty debit card, and the instant that the IRS releases funds to the bank, the balance loads onto the debit card, so someone without a bank account can effectively have the benefits of direct deposit.

      • esp13 has a pony named Steve says:

        I agree with you, but my point is that those who are paying the exorbitant fees on RALs already, do it to get it within a day or two. They may or may not have checking accounts or other pre-paid cards through a check-cashing place. So, just like regular direct deposit, they won’t wait the 8-15 days for the funds to be deposited on one of these cards.

        • TooManyHobbies says:

          Sure, but the banks that provide RALs also provide other services which they use to try to claim that they provide legitimate services. If the IRS provides these instead, it takes away one more reason for the banks to be in the business, which is a good thing IMO.

  17. TooManyHobbies says:

    I sure hope so. I work in the industry, and every time I deal with RALs I feel like I need to go take a shower.

    Some bank products are required, because honestly with certain clientele, the ONLY way a preparer will ever get paid is to take it out of the refund BEFORE the client gets it. But RALs are pretty despicable, and my company stayed out of it until we couldn’t anymore for competitive reasons.

    The treasury department is very much against RALs and is doing everything they can to shut down the business. This year they eliminated the “IRS Debt Indicator” in the acknowledgement – this is the indication that the IRS is going to seize some or all of the refund (typically to pay back child support or something) – this made issuing RALs very risky, and in fact H&R Block has been forbidden from offering RALs this year by the Fed. This is a huge blow to them, RALs was a big chunk of their revenue.

    This year, preparers are required to efile (no more paper). In a few years the IRS plans to have their modernization up to the point where refunds would be deposited within a few days of efiling. They’re hoping that dries up RAL demand quite a bit.

    The end of RALs can’t come too soon for me.

  18. whats happening says:

    This is the way you recieve Michigan Unemployment if you don’t sign up for direct deposit… same fees, It is issued by Chase, and they try to do everything in their power to get you to open an account with them when you make a withdrawl. :(

  19. Red Cat Linux says:

    WTF.

    These don’t seem to be much better. if the Federal government wanted to stop the shenannigans of RALs, why would they offer a pre-paid debit card with fees of it’s own? There has to be a rather small portion of the population for which this is actually a sensible option. This is offering morphine to get people to stop taking opium.

  20. Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

    I’ve used a RAL ONCE, and it came back to bite me in the ass for 7 years. Yea, H+R. Back BEFORE E-file with direct deposit could get you your money in a week, I Took out the loan because it was needed badly – back in the days when my credit sources were few. I didn’t think the fee was too bad.

    But after the loan – money spent – The Gubbament decided it wanted to take a closer look, for no reason whatsoever, at my return (I made under $20,000 that year, and filed a pretty standard return). That was the start of DAILY letters and phone calls demanding immediant repayment of the money. No repayment plans, no options. NOW. TODAY. In the end, the government issued the refund… And they had put very derogatory remarks on my credit record.

    I had them completly paid off in under 2 months, but it put a black mark on my credit that was there for 7 long years. As bad as loan sharks.

    An expensive lesson to learn. Now I use Tax Act, free, with free E-filing (for everyone now, regardless of income!) and my money is in the bank in a week.

  21. arachne says:

    Social Security has a similar Direct Express Mastercard. It has been around for a couple of years and the people I know who have it are very happy with it. In fact some of them were downright ecstatic when I explained that they were eligible for it. The SSA is trying to move away from paper in all its transactions. Here is the fee explanation of the SSA card– which admittedly sounds better than the IRS card : http://www.directexpress.org/userfiles/File/Direct_Express_Fee_Schedule(1).doc

  22. CommanderLogjam says:

    I don’t know when I will get my refund this year, no matter what the process.

    As of now I am unable to file my return because I am unable to obtain a printed 1040 INSTRUCTIONS. The IRS is not sending out tax packets this year.

    I have gone to my local IRS office and they are still awaiting their shipment of the books. I have tried to request one online but they don’t offer the printed version as an option. There is a way to request them by phone, but I don’t want to use my mobile minutes.

    I am assuming that this booklet will be available hopefully at least a day or two before April 15.

    • HogwartsProfessor says:

      Did you check the library? They may have gotten some before anyone else, for reference or checkout.

    • mike says:

      My understanding is that if you itemize, you can file until mid Feb.

      IRS.gov has the forms you need. They are in PDF format and you can even type into them and save them!

  23. BuyerOfGoods3 says:

    I think just like a state unemployment benefit office, no bank should be given sole contracts to “supply” funds like this.

    Conflict of interest.

  24. ClaudeKabobbing says:

    except what happens when you have $2.43 dollors left on a card and you try to use it and they deny card because there is not enough funds in account for the full purchase so eventually your left with a card with some money you can’t use.

    And that does happen, even when you tell someone to charge the exact amount to the card so it can all be used.

  25. mike says:

    If you don’t use the worksheet on the W-4 (which maximizes your taxes) and instead use the withholding tables (which is almost impossible to find on the IRS website, last time I checked), you shouldn’t get a large enough refund for this to matter. On average, I usually owe or get back about $100, unless there was some sort of tax credit that was passed.

    I hate how people think that a tax refund is like some sort of gift from the government. It’s your money that the government took from you and is now giving back, less interest and inflation. Think of what you could have done with that money when you got your paycheck.

  26. ChuckECheese says:

    I may have missed similar comments on here already …
    The gov’t is trying to stop the issuance and mailing of paper checks. Checks are easily lost or stolen, and check-cashing fees are high. For reasons already mentioned here, the gov’t is trying to stop the issuance of refund anticipation loans.

    The hope was for 100% direct deposit, but as we know, not everybody has or can get a checking account. They are ineligible for some reason, or can’t afford one. So the gov’t is issuing cards instead. It’s not free, but it’s cheaper than many alternatives. It’s a bit more secure than a paper check. Gone are the days of free or nearly free basic banking services. I do wonder why, though, given the volume of business the gov’t gives these companies, that they can’t negotiate lower fees than now exist, even providing a certain number of transactions for free, for instance.

  27. lacy1720 says:

    Ok…Here are some facts for everyone reading.

    IRS got rid of what is called a debt indicator. What this did was let the banks that were doing the instant and 1-2 day loans if someone owed IRS for back Taxes or owed for something like back child support or Student loans. The reason that this matters is because if you owe any of those things IRS Keeps the Tax return money. Because the banks are no longer able to see this indicator they have all deceided that it is too risky and are not doing these anymore.
    If you see an advertisment (such as Jackson Hewittt’s) for a 1-2 day loan now it is credit based only! Just like walking into a bank. Call them I did and asked is this a credit based loan and they will tell you that it is. These types of loans were NOT only credit based before this year.
    As far as the cards go. I think the facts about all the cards should be layed out. The way I understand this, after my research, There isn’t a fee for putting your refund on for example the card from H & R Block….and the other fees on the card are pretty much the same as this new government card.
    The fee’s seem to come into play when you want your fee for the preparation of your taxes taken out of your refund so that there is no out of pocket expenses to you.
    I also found out the the OCC shut down a big bank that was linked to one of the big tax prep places. So it may not be that anyone dropped the ball it may have been something totally out of their control.
    I believe choices are what makes our great world go round. I also believe that everyone should have their OWN choices on what they want to pay or not pay to have a service done. I do NOT believe that our government should be in the business of taking choices away because they deem them bad. Everyone’s situation is different and different at different times.