debit-card

Tax refund? Just put it on the card

Jan. 13, 2011 at 11:29 AM ET

If 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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