Tax refunds on prepaid cards coming

By Blake Ellis, staff reporter


NEW YORK (CNNMoney) -- Thousands of Americans will get tax refunds on a prepaid card instead of a paper check as the government looks to cut costs and give people without bank accounts an easier way to get their money.

The Treasury Department launched the pilot program Thursday, saying it will mail letters next week to 600,000 taxpayers with annual income under $35,000.

The letters will give taxpayers the option of activating a MyAccountCard Visa Prepaid Debit Card, on which their 2010 federal tax refund would be direct deposited.

"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.

Once taxpayers open a prepaid debit card, they can reload it with their own money and use it just as they would a regular debit card, but without opening a traditional bank account.

"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," said Wolin.

Not only would it provide a "low-cost option" for Americans -- it could save the government millions of dollars per year, a Treasury spokeswoman said.

While it only costs the government 10 cents to direct deposit money onto a card, it costs a dollar each time it mails a paper check -- adding up to $40 million per year.

In contrast, the government expects to spend $1.5 million on the prepaid card test. The pilot ends in April, but customers will have access to their account under the same terms and conditions for at least one year.

Treasury said it will issue several versions of the prepaid card -- each with different features, fee structures and marketing messages -- during the pilot to monitor their effectiveness before the cards are rolled out as a permanent part of the tax filing process.

The prepaid card is free for all customers, and the monthly service fee will range from being free to $4.95. All cards will offer unlimited free ATM withdrawals at 15,000 in-network ATMs, while a $2.50 service fee and a 50-cent balance inquiry charge will be incurred for using out-of-network ATMs.

Online bill pay, balance inquiries and direct deposit are all free. But holders pay $4.95 to replace a lost or stolen card, $2.50 to withdraw cash from a teller, $4.95 to get a second card and as much as $4.95 to add money in-person at a retail location.

The Visa card will be issued by Utah-based Bonneville Bank, and the Treasury will work with prepaid card provider Green Dot Corp. during the pilot.

In a separate pilot launched this week, Treasury will also offer tens of thousands of payroll-card users -- or potential users -- the opportunity to direct deposit their 2010 refund onto existing payroll cards. Treasury said more than 1.7 million U.S. workers use payroll cards to receive wages.  To top of page

 
Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.07%4.28%
15 yr fixed3.18%3.26%
5/1 ARM3.36%3.43%
30 yr refi4.05%4.21%
15 yr refi3.17%3.18%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 1:13am ET
Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29

Sections

The deal would value Vice at $2.5 billion. The online media company would also create content for the cable network, delivering a wider audience. More

Gas prices are falling to nearly $3 a gallon in some parts of South Carolina, and that will soon be common in much of the country. More

Netflix told the FCC that its speed on the Comcast network became so slow that customers began dropping their service. More

The Coolest Cooler is the most successful Kickstarter campaign in the site's history, raising $13.3 million from over 62,000 backers. More

Five CNNMoney readers share stories about saving that you can learn from: What they would do differently if they had another chance. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.