Debit cards to replace some federal tax refund checks

Paula Duffy's picture

More than a half million taxpayers will be offered a chance to receive their 2010 federal income tax refund in the form of a pre-paid debit card, rather than a paper check.

The Wall Street Journal reported that it costs the U.S. Department of the Treasury, $1 for each check it issues, including the cost of tracing checks that are reported stolen or lost in the mail.

The debit card method is estimated to cost the government a dime a card, one of the two reasons Treasury has retained Green Dot Corp. to administer a test program for this tax season.

Federal officials also know that many low income taxpayers don't have bank accounts, either due to their associated fees or as a result of the bank booting them off their list of customers. A report by the F.D.I.C noted that approximately nine million U.S. households are without bank accounts.

The debit card the feds have in mind would be able to receive direct deposits and be suitable for paying bills, buying day-to-day necessities and for free cash withdrawals at designated ATMs. The program would also have the net benefit of getting these taxpayers away from expensive, local check cashing businesses and assist them in saving money, should they so desire.

Green Dot has more than 3 million prepaid cards across the U.S. typically enrolling customers through retail stores or the Internet. The pilot program will use a variety of marketing messages to attempt to determine what appeals to the target audience. Half the cards will carry a monthly fee of $4.95 while the rest will be free.

Add new comment