Pilot program offers tax refunds on prepaid debit card

Thursday, January 13, 2011

The Treasury Department has announced a pilot project to offer a prepaid debit card to 600,000 low-income taxpayers who, based on the fact they have not requested direct deposit of their tax refunds, are unlikely to have bank accounts. The card will allow these selected people to receive tax refunds electronically without resorting to high-cost refund anticipation loans (RALs).

Treasury will mail letters next week to 600,000 low- and moderate-income individuals nationwide. These taxpayers will be invited to activate a MyAccountCard prepaid debit card in time to have their 2010 federal tax refund direct deposited to the card. Compared to paper checks, direct deposit provides a safer, faster and more convenient way to receive a federal tax refund as well as other regular income.

There will be some costs associated with the card, but Treasury has said that free features will include point-of-sale transactions, online bill pay, ATM cash withdrawals at more than 15,000 ATM machines nationwide, and cash back at participating retail stores. (The ATM withdrawals are through MoneyPass ATMs: Search for the nearest ATMs.)

As part of the pilot, Treasury will randomly offer several different variations of MyAccountCard in order to evaluate which product features, fee structures and marketing messages generate the greatest positive response from taxpayers. The results of the pilot will help determine the benefits and feasibility of such card accounts before they are offered to the general public.