Treasury Launches Debit Cards For Tax Refunds

Americans without bank accounts may soon be able to carry debit cards.

The Treasury Department is rolling out a new program to let people collect tax refunds on government-issued debit cards, rather than via checks sent in the mail, the government announced Tuesday. By allowing consumers to collect their refunds electronically, the new program would prevent Americans from leaning on expensive check-cashing services to access their tax refunds.

But more significant, advocates say, is that it would let people who don't have bank accounts use a debit card.

"It brings people into the modern banking system," said Lauren Saunders, an attorney at the National Consumer Law Center, in Washington. "It can give them access to the world of electronic card payments."

The cards will function as prepaid debit cards, which fill when the government issues a tax refund, according to the Treasury announcement. But unlike some bank account-linked debit cards, Saunders said, they won't carry an overdraft fee if a consumer runs through the amount on the card.

There are caveats, however. When consumers want to withdraw cash, they'll have to use one of 15,000 designated ATMs nationwide. Like with conventional debit cards, using the Treasury card at an ATM outside the network comes with a fee from the hosting bank. But, according to Saunders, the Treasury card comes with an additional penalty -- $2.50.

"That can add up," Saunders said.

Conventional debit cards may soon become less attractive to consumers, as banks cook up new fees to maintain profits in response to last year's financial regulation. Bank of America has estimated that new laws could cut its debit card revenue by 80 percent.

Treasury has contracted with Provo, Utah-based Bonneville Bank to issue the Visa-branded cards.

Comments

[uneedtoknow]

02:53 PM on 01/15/2011

This is a lobby issue from JP Morgan Chase and the banking industry. States have also been doing this with unemployment. The banks are once again making a lot of money off of these recipients. Perhaps Elizabeth Warren's consumer agency should look into this.

[goodog]

12:23 PM on 01/15/2011

per my insightful niece: "I don't understand why they don't mention the real reason, which was genius on someone's part, to allow the gov't to hold all your unspent money beyond the refund date and earn more interest for itself instead of it earning interest in your account (if you have an interest earning account)." I remember this being a recent scandal in which the military's contracted insurance companies were (are) issuing debit cards to the bereaved beneficiaries of military personnel who had specified that the money be paid in a lump sum. Any number of people will not withdraw all the money right away, thus earning interest for the government and any intermediaries.

[Andy Manor]

03:48 PM on 01/14/2011

Now I know a few people who don't have bank accounts and they are typically going to one of those tax return places to get a refund anticipation loan so they can have their money fast instead of waiting for a check in the mail a month later. What would be ideal is if the United States could do what many other nations do is have a Postal Bank. In many foreign nations if you have a check from the government, or certain organizations that need to be cashed you can take it to the post office and have that check cashed without any fees. Also they allow bill payments at the post office and the payment is credited to your account rather quickly.

[Chase Dagger]

03:39 PM on 01/14/2011

What a scam! There are no benefits for the individual here, like is this the best they can come up with? "...is that it would let people who don't have bank accounts use a debit card". Oh thank you very much, I feel so lucky to have bank card.
Potential real reasons:
1. Makes it easier for the gov to track where the money is spent (I'd like to see how privacy statement is written on these cards...of course not reported.)
2. Harder for the individual to obtain cash and therefore spend there money on the black market, and or share with family and friends.
3. Easier to restrict money access, collect money for debts, and harder for individual to hide their money.
Look what they did to Wikileaks cutting off Credit Card, and PayPal payments. The goverment is evil, corporations are evil, the people are ignorant.

[nofriendofrepublicans]

02:04 PM on 01/14/2011

As long as it's not Walmart gift certificates.

[Sparks Magoo]

01:37 PM on 01/14/2011

How can you not have a bank account? The Fed's could save a ton of money each year on checks and now these debit cards if the just did a direct deposit into bank accounts.

If you don't have a bank account you don't deserve a return....

[Chase Dagger]

03:29 PM on 01/14/2011

"If you don't have a bank account you don't deserve a return"

Really? I don't have even justify myself on this one. You're an idi0t.

[Andy Manor]

03:40 PM on 01/14/2011

There are plenty of people who do not have bank accounts for various reasons. Banks run credit checks on people before they will open an account and if you owe too much money they will not open one up for you. Also many senior citizens don't trust banks because they lived through the depression. When my great grandfather passed away he had over $50,000 burred in coffee cans in his back yard. Also many people who live in poor neighborhoods don't have bank accounts because of all the fees that banks charge.

[Captain Hindsight]

12:32 PM on 01/14/2011

Why not trend Tricky Ricky Scott of FloriDUH and give out Gift Cards?

[skeptic al]

12:27 PM on 01/14/2011

just another way in which big brother can monitor you...

[celticsrule]

10:39 AM on 01/14/2011

While this will hopely put the Checkcash companies
out of business, it will empower the greedy banks to exploit the taxpayer.

You can only take a max of $500 out of your account each day.

They will raise the fee for withdrawal and they will lower the maximum amount,
so they can profit.

There must be a way to prevent this before they start to take advantage.

[GREATerSOCIETY]

09:58 AM on 01/14/2011

This is SUPPOSED to be all about how the government can put money into peoples' hands most easily, at the lowest cost to the taxpayer. A recipient can cash out $800 at an atm, @ 2.50 per trans., for $10 if max w/d is $300. 1.25% is MUCH better than cash-for-fee's BEST day.

But...Debit cards have a high loss and underspend rate. The issuer, not the Gov't. gets that money! Once the cards are issued there is no obligation to re-issue. Question is, who besides Bonneville Bank is in the money on this.

And, are they doing it for free as a public service, or is the Fed PAYING for this? Hope there's a threshold where unclaimed funds COME BACK to Uncle Sam!

[Captain Hindsight]

12:36 PM on 01/14/2011

Banks borrow at 0% and charge 10% plus management fees to give it out.
Only in Bank Of America!

[Carolab]

08:44 AM on 01/14/2011

More bank fees and more ways to keep an eye on how you spend your $.

[terrified01]

08:41 AM on 01/14/2011

Just like the Gov turning over some of the Financial Aide for college students to a private company that sends out debit cards and charges fees for use. Absurd!

[ZSV]

08:23 AM on 01/14/2011

Just another way for the cronies that really run the white house from the banks (dimon, geitner etc) to charge you an activation fee, a 50 cent charge every time you use it and probably a yearly fee on top. Their last and only way of making money is from stealing our tax money (bailouts, quantitative easing, zero interest loans etc) and now it's more direct than ever. Their Cdo bubble has burst and they are going down like the titatic.

[NC2NJ]

08:14 AM on 01/14/2011

another way of taking our money and tracking how we spend it.. smh

[LODGE4]

07:55 AM on 01/14/2011

It's cheaper to mail me a debit card than a check ????
REALLY ?????????????????