Treasury Launches Tax Refund Debit Cards to Stop Rapid Refunds and High Cost Loans
Are you in a low income bracket and don’t have access to a bank? Well the government is trying to help out by issuing tax refunds in the form of debit cards.
The Treasury Department is going to send out 600,000 letters to consumers, giving them the opportunity to take part in a pilot program that will put their tax refunds on debit cards. These cards can be used at ATM machines, to pay bills or to buy things, just like cash. But there is a catch; fees will be a part of these cards.
Half the cards will have a $4.95 monthly fee while the other half won’t. If using ATM machines the machines must be a part of the Moneypass network or you will charged a fee of $2.50 for out-of-network ATM withdrawals and a .50 cent fee for out-of-network balance inquires. If you want to load money to the card or order a replacement card then a $4.95 fee will be charged accordingly. The card, named MyAccountCard, is issued by Bonneville bank and will have a Visa logo on it.
Although there are fees associated with these cards, the alternatives have also been expensive! Many Americans have had to use check cashing services, payday lenders and loans labeled “Rapid Refund” to get their refund check cashed or to get their money quickly. These services are notorious for charging very high fees and interest rates.
In the past, the IRS would give banks information on whether a tax refund check would be issued to a particular person and also would notify the bank if the check would be held up for any reason, such as back taxes, child support or student loan payments. If the bank got the all-clear then the bank would issue a loan to the taxpayer for the amount of the refund, but they would charge high fees.
Now, the change is that the IRS is no longer giving banks that information and now fewer banks are willing to give out loans on income tax refunds. The IRS says they are trying to protect taxpayers from the high fees that go with a refund anticipation loan. The problem is no matter the cost, some people want that option.
A quarter of American households have no access, or very limited access, to banking services according to a FDIC 2009 survey, therefore these new tax refund debit cards may be the best alternative. Let’s compare the costs of the new tax refund debit card and rapid refund type checks. These checks are offered by tax preparers around the nation.
If you want to try this new alternative but rely on a tax preparer to do your taxes and pay your preparation fee through your refund, there is another way you can go. The IRS offers a program called Free File. You can do your taxes for free and receive the refund via the debit card. If you have access to a computer go to the IRS website at http://www.irs.gov for more information.
Don’t fall victim to check cashing stores and other costly methods to get your tax money, especially when there is a viable option coming to you in the mail.