Tax return are, as a result of electronic banking and tax filing, harder to give to those without bank accounts. The Treasury Department thinks tax refund debit cards could possibly be the solution. People without financial institution accounts, the so-called “unbanked” or “underbanked,” don’t benefit from the electronic funds transfer of a income tax return to a bank account from the Internal Revenue Service. A tax refund check takes too long. It can take weeks to get where they’re going. The unbanked will do something to acquire their money quicker. Typically this means applying for “refund anticipation loans”. Printing and mailing checks cost millions of dollars. The working class end up paying for it. Article source – Tax refund cards will help the unbanked get their money faster by Personal Money Store.

Making way to the tax refund debit cards

There is one reason tax refund debit cards are so good. The reason is speed. As outlined by the Associated Press, direct deposits take eight to fifteen days to acquire the cash into an account. Getting a income tax return check can take even longer with a six week wait for many people. Those without financial institution accounts may feel forced into borrowing. A refund anticipation loan then comes with steep fees. Next year there will be a different option. The pilot tax refund debit program can be offered to numerous taxpayers. The tax refund debit cards will work like checking accounts — without the checks or the bank. The cards can be insured like bank deposits and will include consumer protections from unauthorized purchases if they’re lost or stolen. Other income can be stored on these cards. That means bill-paying services can be available also.

Taxpayers told to obtain a bank account

26 million working class people, as outlined by the Center for Economic Progress, might benefit from income tax return debit bank cards. The number came by subtracting 70.3 million, direct deposit refunds from the 2010 tax season, from tax refunds of 96.3 million. Automated Trader reports that the Obama administration is exploring ways to encourage more individuals to get financial institution accounts. Congress received a $50 million request to fund a program called “Bank on USA.” This is to help low-to-moderate income working class work with states in getting into banking. An FDIC 2009 survey showed roughly 9 million households were without bank accounts.

Getting rid of return anticipation loans

The tax refund debit card initiative is part of a broader program by the Obama administration to curtail federal policies that lead to risky financial decisions and provide people with better financial alternatives. Last month there was already a policy change announced, says the Wall Street Journal. Banks use “debt indicators” to process return anticipation loans, although now those won’t be provided by the Internal Revenue Service anymore beginning in the 2011 income tax season. Banks may have a more difficult time making short term loans. The loans typically would have between 50 percent and 500 percent to the annual percentage fees.

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Associated Press

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Automated Trader

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