U.S. Treasury Tests Debit Cards for Tax Refunds

Photo (cc) by Neil T

This post comes from partner site LowCards.com

The Treasury Department is now testing the distribution of debit cards instead of paper checks for tax refunds to low-income individuals.

This week, 600,000 low-income individuals will receive letters inviting them to have their tax refund deposited to the MyAccountCard Visa Prepaid Debit Card.

The Treasury Department is converting to debit cards for several reasons.

For the government, they’re less costly to mail than checks. For the recipient, they provide a safer, faster, and more convenient way to distribute money than checks. Many low-income individuals do not have bank accounts, and the cashing of these refund checks can be costly. Cards are expected to be in the hands of consumers six weeks earlier than a check. The government hopes the distribution of these cards cuts down on the costly refund anticipation loans than many low-income consumers receive.

The government has already switched to debit cards in other areas with federal benefits, like Social Security. The Treasury says that more than 1.7 million workers receive their wages on payroll cards, and many of them do not have bank accounts.

The card is accepted wherever Visa debit is accepted and can be used for online purchases. It does not charge for point-of-sale transactions, online bill pay, or cash back at participating retail stores. ATM withdrawals are free at more than 15,000 ATM machines nationwide. However, there is a $2.50 service fee for out-of-network ATM withdrawals, and a 50-cent fee for balance inquiries at out-of-network ATMs. There is a $4.95 fee to replace a lost or stolen card or to get an additional card.

The Treasury is testing different offers, and this has led to some initial controversy. About half of the 600,0000 people will be offered a card with a $4.95 monthly fee. The other half will be offered a card with no monthly fee. The results of this test will affect the nationwide rollout.

The card is available only to those who receive a letter from the Treasury. The letter will explain the fees and how to sign up and use the card. There is no credit check required.

The card offers benefits that can help users manage their balance. Free account updates are available online or by phone anytime. Free balance alerts can be sent to your mobile phone (your wireless carrier may charge text messaging rates).

The Treasury says that consumers have zero liability if a card is lost or stolen or used fraudulently. The cards are insured by the Federal Deposit Insurance Corporation (FDIC).

“This can be a good option for people who do not have a bank account,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook. “It is safer than cash and the fees are lower than check-cashing operations, which means you can keep more of your money. But we see two concerns: The $4.95 monthly fee that is being tested on half the recipients seems high. And studies show that people tend to spend more freely with a debit card than paying with cash.”

Here’s the U.S. Treasury press release on debit cards for tax refunds.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Small Appliances You Don’t Need — and What to Use Instead
7 Small Appliances You Don’t Need — and What to Use Instead

Here’s how to get the job done without blowing money — or losing counter space.

7 Reasons Workers Age 65 and Older Have Not Retired Yet
7 Reasons Workers Age 65 and Older Have Not Retired Yet

For some, the golden years are a time to increase the gold — but their reasons for delaying retirement vary widely.

This Is the Top Home Insurer — for 18 Years Running
This Is the Top Home Insurer — for 18 Years Running

Homeowners are increasingly unhappy with their insurance companies, but one stands out for the better.

Beware These 5 Common Work-From-Home Scams
Beware These 5 Common Work-From-Home Scams

You can spot scammers and con artists with a little know-how.

It’s Worth Paying More for These 7 Things
It’s Worth Paying More for These 7 Things

Sometimes, the difference in quality makes it worthwhile to open your wallet a little wider.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

Why Cloth Masks May Increase Your Coronavirus Risk
Why Cloth Masks May Increase Your Coronavirus Risk

A new study finds that wearing a cloth mask can backfire if you don’t clean it properly.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.