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Subscribe to RSSIf you get a letter in the mail next week offering to have your tax refund deposited onto a pre-paid debit card, it’s (probably) not a scam.
The U.S. Treasury Department said this week it is testing a program permitting taxpayers to get their tax refund deposited onto a card instead of as a traditional check or via direct bank account deposit.
The cards are aimed at people who don’t have traditional bank accounts. There will be some fees associated with using the cards for certain transactions, such as out-of-network ATMs. The Treasury said it would test several different types of fee structures in the pilot program.
Government officials appear to be hoping that the cards will be a cheaper alternative to check-cashing services, and a safer alternative to carrying cash.
The debit card option will be offered initially to 600,000 low- to moderate-income taxpayers. The Treasury Department also will encourage the approximately 1.7 million workers who get their paychecks deposited onto payroll cards to have their tax refunds deposited onto the cards.
A 2009 government study found that about 9 million U.S. households do not have a checking or savings account. Another 21 million households are underbanked, meaning they have a checking or savings account but also occasionally use other financial options, such as payday loans or non-bank money orders, for financial transactions. Such transactions can be costly.
Related:
Red Tape Chronicles: Tax refund loans disappear; now, more fees
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What's "safer"?? 1. carrying around a small amount of cash or 2. teaching a low-income earner the "convienence" of using plastic? My guess is a bank was behind the funding for this, pushing the perceived "convienence" of racking up credit card debt later on. What a joke! stick to cash and you're better off.
It would be better if banks accepted tax refunds into new checking accounts for those who didn't have one previously. Instead of offering some card --- which is basically a checking accout, but without an actually (brick-and-mortor) bank --- that has certain usage limitations. There are many of these "online" banks that already exist for people that prefer not to use any of their local bankers.
Wouldn't it be more benefitial to both a bank and to an accountless taxpayer, to start a bank account and learn how to effectively use & maintain their finances. Carrying around cash may not be so safe...some people receive thousands of dollars from their tax refund --- even for lower-income earners. Getting some temp loan is silly for most, but given the opportunity to setup a new bank account would be useful for all.
Fees in order to use your refund money? This is a scam, sanctioned by the federal govt!
Scam? I see no scam here. I see a way for someone not to have to pay 10% of their refund just to cash it because they don't have a bank account.
I see a card that has no fee to withdrawal if you use their atms, and even in my tiny arse town I see one on the list less than a half mile away. And a $2.50 out of network atm fee, which is cheaper than my last 2 banks charged.
99% of people will pull the money off that card in the first 30 days and not have to worry about a monthly maintenance fee.
The card isn't meant to replace a bank account. It's meant to provide basically a service for those who don't have an account.
If it was a scam, don't you think it would be offered to 300,000,000 others and not just the 600,000 it's going to?
A sucker is born every minute...and another one is parted from their money.
My rule is I am not paying to use my own money.
I see the treasury dept is now getting on board with the program HRBlock started several years ago, in an attempt to reduce check cashing fees for those who, for one reason or another, choose not to have a checking account.
In some states, welfare and food stamps use a debit card to better manage their payments.
While the welfare and food stamp cards hopefully are not allowed to use ATM's, the Emerald Cards can use ATM's. In this case, HRB and the local banks charge fees to provide that service.
With an Emerald Card, you can go to some retail stores, buy something, get cash (up to $60.00 Max), and pay NO fee. Bottom line is if you know and follow the rules, you avoid the fees. I make sure the client understands how to obtain their money, from their Emerald Card, without fees. Then it is up to them to follow the advise.
The Emerald Card holder also has the option of payroll direct deposit, at NO FEE.
HRBlock Bank cannot do all of this for free. They receive income from each transaction, which is underwritten by the merchant.
Looks like the Federal Government is trying to get in on that income as well. Should they be doing that? I do not think so.
If people kept track of their checking account balances and balanced their checkbook every month, they can avoid the fees too. I do.
And finally, a debit card is not a credit card, and so no huge credit card debt, like you can with a credit card.
dw
Sorry if duplicate post. I wouldn't choose the savings option, then your limited to only 4 withdraws per month. The monthly fee can range from 0 to 4.95, it really depends on how much a refund you would get if it would be worth it . It still technically a bank account unlike the social security & unemployment debit cards, this card is still susceptible to all garnishments. I think a one time card would be better. Some tellers won't let you get cash back with a prepaid or normal debit card.
I have mixed feelings on this. The federal government has picked up on this idea from the states. Indiana and some fifteen other states use Eppicard. Indiana payments include court administered Child Support, Welfare and Unemployment Income payments. The Eppicard system isn't bad as these things go, but you have to use their participating ATMs (closest is well over 20 miles away) or pay fees. If you want to transfer money to your bank account you have to use their somewhat cumbersome automated telephone system, rather than on-line, where all the account data resides, and where you designate the account to receive transferred funds. Can be frustrating if the system is busy, long waits, or goes down, has occurred several times. However, on the whole, it is a usable system for those who receive on-going payments AND use debit cards to shop AND can routinely check their balance and otherwise manage their account.
But, for those who have consistently lived on a cash-basis, which many do, this still amounts to giving someone else a share of your money for nothing. Not all cash-basis people are poor, they just believe in managing the affairs in a different way. For some, being involved with managing a checking account may be too daunting; they understand the cash in their pocket, but not the numbers on a page. For others, they may deal daily in a cash pay world, like the fresh produce business, the pawn industry, small restaurants, etc.
Personally, I feel it should be a condition of bank charter, whether state or federal, that all demand instruments of the federal government, and those of the state in which the bank is doing business, be honored without charge to the owner, regardless of whether the individual holds an account in that bank or not. This would include both "checks" and "warrants" and surrendered bonds, but not "chits" (IOU's) such as California issued a couple of years ago. The banks could still demand proper identification, and refuse cash instruments that it felt might be counterfeit or stolen. One step further, they should be obligated to turn the individual over to law enforcement, as a means to maintain trust in our financial system.
Use of third party payors, always means that the public's money is being diverted to private hands, either through legimate processing fees or through excess charges through ATM or POS operators or bank charges. The states may have a legitimate case regarding postage costs involved with on-going payments, but for the federal government, which should be able to mail these checks for free, is looking at a once-a-year obligation. This is just another case of privatization gone wrong.