The Green Sheet Online Edition
March 3, 2011 • 11:03:01
Has the prepaid tax refund moment arrived?
#photo1As tax season heats up, the U.S. Department of the Treasury is embarking on a national pilot program to load tax refunds on general-purpose, reloadable prepaid cards. In a webinar, Melissa Koide, Vice President for Policy at the Center for Financial Services Innovation, hailed the MyAccountCard pilot as a "pretty powerful moment" in the lives of unbanked and underbanked tax filers.
The pilot began in January 2011. The Treasury Department, which chose Bonneville Bank to issue the cards and Green Dot Corp. to manage the program, credited CFSI's Savings and Financial Electronic Transaction (SAFE-T) Accounts proposal as a road map for the direction of the program.
The SAFE-T Accounts proposal, authored by Koide, said a tax refund card should be affordable, user friendly, underscored with consumer protections and help cardholders build savings. Not only would such a program provide low-income households with a convenient and accessible financial tool for handling tax refunds, but it would also save the federal government millions of dollars annually in reduced paper check processing and mailing, Koide wrote.
Opportunity for low-income filers
In the webinar entitled Treasury Department's Launch of a Tax Time Prepaid Card Program, Koide said 26 million tax filers received tax refunds on paper checks in 2010, worth $58 billion. Of households with an adjusted gross income of less than $30,000, over 50 percent received paper checks, Koide reported.
The webinar featured Josh Wright, Director, Financial Access Innovations Office of Financial Education and Financial Access at the Department of the Treasury, who outlined the pilot program. Wright said 600,000 tax filers who opt to receive refunds on paper checks rather than have those funds direct deposited were randomly chosen to receive one of eight different MyAccountCard offers.
The eight offers have different combinations of messaging, pricing and features. For example, one offer emphasizes the convenience and speed of refunds using the card, while another offer focuses on the card's safety and security aspects. In addition, offers were differentiated by price ($4.95 monthly fee versus no fee) and whether or not the card would come with a savings account feature.
All the offers tout free ATM withdrawals and account balance checks at 15,000 network locations nationwide and free POS transactions in the United States. But fees are charged for withdrawals at out-of-network ATMs, teller cash withdrawals, and to replace a lost or stolen card.
Wright said the goal of the pilot is not to see how many people opt to use the cards, but which of the eight offers are more popular and how the cards are used.
Benefits to the unbanked
The final webinar presenter, Robin McKinney, Director of the Maryland CASH (Creating Assets Savings and Hope) Campaign, discussed how publically funded tax preparation firms have transitioned from solely helping people file tax returns to helping them open bank accounts, split up tax refunds and drop the amounts into multiple accounts, and purchase U.S. savings bonds.
Another development is that tax preparers now offer direct deposit of refunds onto prepaid cards, McKinney said. Benefits of the cards include:
- Returns can be received almost twice as fast through direct deposit versus paper check.
- Filers do not have to rely on check cashing businesses, which charge what are often considered exorbitant check cashing fees.
- Filers' safety and security can be increased, as they do not have to carry cash around tax time, when burglaries and assaults go up.
For these reasons, McKinney is excited about the possibilities for the Treasury's MyAccountCard program to improve the lives of the unbanked.
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