U.S. to test giving tax refunds on debit cards

Under a pilot program aimed at eliminating paper refund checks, the Treasury Department will offer 600,000 low- and moderate-income people the option to receive their money on prepaid debit cards.

By Jim Puzzanghera, Los Angeles Times
January 13, 2011, 3:21 p.m.

Reporting from Washington
Hoping to say goodbye to paper tax-refund checks, the federal government launched a pilot program to let some people receive their money on a debit card.

Next week, the Treasury Department will send letters to 600,000 low- and moderate-income taxpayers offering them the option of signing up for a special MyAccountCard Visa prepaid debit card.

Green Dot Corp. in Monrovia, the nation's largest prepaid debit card company, got the nod to provide the cards and manage the pilot program, the Treasury said Thursday.

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There are two goals: save the government the expense of mailing checks and provide taxpayers without bank accounts quicker access to their refunds.

The Treasury mailed about 45 million tax-refund checks last year; had those payments been processed electronically, the government would have saved $40 million.

The majority of those getting refunds last year received their money electronically, as direct deposits into their bank accounts. The debit card is aimed at those who have limited access to banks or don't have bank accounts, part of the 37% of those who got checks mailed to them.

The Treasury also noted that checks are more likely to be targeted by mail thieves and that people without bank accounts often must pay high fees to cash their refund checks.

The Treasury is touting other benefits of the prepaid Visa cards, which are being offered through Bonneville Bank in Provo, Utah.

The cards are reloadable, allowing future refunds to be added to them. Those in the pilot program will be able to receive their work paychecks on their cards through direct deposit, pay bills online and withdraw money without service fees from about 15,000 ATMs nationwide.

"This innovative card can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely and conveniently, giving users more control over their financial futures," said Deputy Treasury Secretary Neal Wolin.

At this point, Treasury is determining who can take part in the pilot program and what features they get with the cards. Those who receive the letters, for instance, will be randomly offered cards with different features and fee structures to determine what would be the best options for consumers if the program is expanded. Some of the cards, for example, will have a $4.95 monthly fee, and others would not carry any fees.
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