In yet another realization of the toll the recent recession has taken on families across the nation, the IRS recently announced its tax refund debit card for those who no longer have access to traditional banks and bank products. The pilot program is designed for what the treasury calls “low and moderate income people who do not have checking accounts”.
So what does that mean? Basically, if you typically face high check cashing fees when you cash your income tax refund checks each year, you can request one of these Visa debit cards. Instead of waiting by the mailbox for weeks or sacrificing a percentage of your expected return by filing a rapid refund anticipation loan, you simply check your debit card balance from time to time, via a website or quick phone call to a toll free number.
Once your refund has been applied, you may then withdraw the funds at an ATM or use the debit card the same way you would a credit card when making purchases.
Why Now?
As mentioned, the recent financial problems the U.S. has faced has resulted in far more than lost jobs and homes. Many desperate families found themselves facing bank charges associated with checks not clearing their accounts. Those fees, sometimes as much as $40 from both the bank and the merchant, can quickly add up. This resulted in overwhelmed consumers simply abandoning their checking accounts. No checking account, no debit card.
That means the IRS will have no way to direct deposit an income refund. These pre-paid Visa cards are the solution. Currently, there are approximately 1.7 million consumers who have their payroll checks deposited to similar cards due to a lack of bank accounts. Perhaps the best part of this program is it’s not only limited to deposits made by the IRS. It’s a solution for many who stand in line at cash checking offices each week in order to cash their payroll checks. It is, in its truest sense, a debit card. The only difference is it’s not linked to (nor is it required to link to) a checking account.
Is it Free?
The first question many taxpayers are asking is, “Is it free?” Surprisingly, these services are free – for the most part. Visa brand MyAccountCard – identical to Green Dot Gold Card – has agreed to offer several free services as part of its own incentives, including free cash withdrawals at more than 15,000 ATM machines, no fee purchase transactions and free online bill pay. That’s a better deal than most banks offer their bank customers.
That said, there could be fees associated with using an ATM that’s not part of the networks the IRS has contracted with. That shouldn’t be a problem, though. More and more banks are recognizing the benefits of teaming with the IRS. This information is readily found in the mail outs or on the website. Currently, the IRS is considering its options in terms of service fees it may be considering. It’s marketing four options, including a card with no fee at all. Time will tell.
Uncle Sam’s Invitation
The IRS recently sent out more than 600,000 invitations to those households it deems low to moderate in terms of income. If you didn’t receive an invitation, don’t worry. You can still visit the IRS website and request one. The IRS is banking on this being a much safer, far more convenient and an all around better solution.
The IRS is also hoping consumers who do take advantage of this program will continue to use the debit cards. It says it can become a powerful financial tool for those attempting to rebuild their credit ratings while also managing their finances.
In the Long Run
Ideally, this new program will prove to be a “win win” for everyone. If nothing else, it will provide important feedback for the habits of American taxpayers. It will also provide insight as to whether the program will catch on and be picked up as a viable financial option. Ideally, if the IRS is right, this will become “an integrated part of the tax filing and refund process” not only for those without access to a checking account, but for the collective American taxpayer.
Bottom line, this is the beginning of the end for those expensive refund anticipation loans and the end of the antiquated paper checks that are worrisome for someone watching his mail box.
