New federal tax refund debit cards for taxpayers without bank accounts

No bank account, no problem. That's the U.S. Treasury Department's new mantra.

Treasury officials today launched a pilot program offering low-cost, prepaid debit cards to taxpayers who may not have a bank account, just in time to have their 2010 federal tax refunds directly added to the cards.

Around 600,000 low- and moderate-income individuals across the country will soon get a letter from Uncle Sam giving them the chance to have a MyAccountCard Visa Prepaid Debit Card.  

This is the latest move by the federal government to go paperless. Last summer, the Obama Administration announced that it wanted all federal payments to be electronic by 2013. At that time, taxes weren't specifically mentioned.

But it's no surprise that the IRS, the agency that interacts with most Americans, is now getting in on the plastic pay out process. Until now, the IRS has been on the receiving end of debit and credit card transactions by folks paying due taxes.

The reason why Treasury and the Administration like debit card transactions is simple. It costs less for the government to administer.

And, argues Uncle Sam, it's also better for taxpayers. Compared to paper checks, the debit card direct deposit provides a safer, faster and more convenient way to receive a federal tax refund.

"This pilot program will provide low- and moderate-income Americans with a low-cost option for faster delivery of their federal tax refund," said Deputy Secretary of the Treasury Neal Wolin in the official announcement of the program. "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."

Different debit cards with different fees: There will be no cost to have a tax refund loaded onto the card. The card also will offer free point-of-sale transactions, free online bill pay, free cash withdrawals at more than 15,000 ATM machines nationwide and free cash back at participating retail stores.

However, if it's used for other purposes, such as out-of-network ATM withdrawals or using it as an ID to get cash from a teller instead of a machine, debit card holders could face some extra charges.

The individuals who get the MyAccountCard invitations will also get information about the card's features, including those which have fees.

Apparently anticipating possible complaints about potential fees, Treasury says it will randomly offer several different variations of MyAccountCard so it can "evaluate which product features, fee structures and marketing messages generate the greatest positive response from taxpayers." 

The four MyAccountCard versions going out in this pilot are:

1. Card with no monthly fee and no linked savings account
2. Card with no monthly fee and a linked savings account
3. Card with a $4.95 monthly fee and no linked savings account
4. Card with a $4.95 monthly fee and a linked savings account

The results of the pilot, say Treasury officials, will help determine "the benefits and feasibility of a card account as an integrated part of the tax filing and refund process."

Consumer watchdogs approve: However, consumer groups seem to be supporting the Treasury debit card move.

"Taxpayers who already have a bank account can get speedy direct deposit of their tax refund from the IRS," said Jean Ann Fox, spokeswoman for the Consumer Federation of America, said in a statement about the new federal debit card program. "Treasury's MyAccountNow card extends that speed to families without a bank account. It enables taxpayers to get their tax refunds fast without paying steep fees for refund anticipation loans or refund anticipation checks."

Lauren Saunders of the National Consumer Law Center also praised the move. "Treasury has made a good deal for consumers eligible for the pilot project," she said in the same statement. "The MyAccountNow card is a well-designed prepaid card that can be a good alternative to bank accounts. It has low fees, free access to customer service, and can be used year round for routine financial transactions."

Even more plastic possibilities: Treasury also began this week a companion pilot to encourage current and potential payroll card users to direct deposit their 2010 federal tax refund onto their existing cards. 

Nationwide, more than 1.7 million workers use payroll cards to receive and access their wages, often because they do not have bank accounts. 

Working with nationwide payroll provider ADP, Treasury will highlight the safety, ease and convenience of direct deposit onto payroll cards through tax season communications, including materials distributed with pay statements. 

The fine print: The Visa-branded MyAccountCard debit card will be issued by Bonneville Bank, acting as Treasury's financial agent and pursuant to a license from Visa U.S.A. Inc., with additional services provided by Bonneville Bank through its program manager, Green Dot Corporation, a prepaid financial services company. 

And if you just can't wait for a letter from Treasury, you can get more details on the MyAccountCard at its official website and from its FAQs for customers.

Related posts:

• Direct deposit to replace U.S. checks
• The IRS' electronic future
• EFTPS 'R' Us

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