If you don’t have a bank account, it is going to be hard to obtain a tax refund. This is because electronic banking and income tax filing are becoming so popular. The Treasury Department thinks tax refund debit cards could possibly be the solution. An income tax return electronically transferred isn’t helpful for any person without a bank account, which is also called “unbanked” or “underbanked”. Tax refund checks can take weeks to arrive. The unbanked will do something to get their cash faster. Typically this means getting “refund anticipation loans”. These checks also cost taxpayers enormous amounts just to print and mail them.
Possible tax refund debit cards
The biggest advantage offered by tax refund debit cards is speed. Income tax refund checks take six weeks to come within the mail when even a direct deposit can take eight to fifteen days to show up in the financial institution, says the Associated Press. People without financial institution accounts are likely to borrow against their tax refunds, paying steep fees for a refund anticipation loan. Starting next year, a pilot tax refund debit card program will be offered to a number of hundred thousand working class. Without a check or financial institution, the tax return debit cards work like checking accounts. Bank’s deposits are insured like the bank cards. Also, there can be consumer protections stopping all purchases if the cards are lost or stolen by anyone. Other income can be stored on these cards. That means bill-paying services will be accessible also.
Taxpayers and financial institution accounts
26 million working class people, as outlined by the Center for Economic Progress, might benefit from tax refund debit bank cards. That number was reached by subtracting direct deposit refunds from the 2010 tax season– 70.3 million — from total tax refunds of 96.3 million. Automated Trader reports on the purpose of the program. Evidently the Obama administration wants more individuals to see how easy it is to have a financial institution account. 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. About 9 million households have bank accounts, as shown in a FDIC 2009 survey.
Nipping refund anticipation loans in the bud
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 individuals with better financial alternatives. The Wall Street Journal explains that policy is already changing. One of the most recent change was announced just a month ago. Banks use “debt indicators” to process return anticipation loans, although now those won’t be provided by the IRS anymore starting within the 2011 tax season. Now banks are having a harder time making the short term loans that end up with annual percentage fees between 50 and 500 percent to them.
Associated Press
google.com/hostednews/ap/article/ALeqM5gjOACVZgIYIFoYxqpOl-uISuMxiAD9HVPC6G3
Automated Trader
automatedtrader.net/real-time-dow-jones/14805/-us-treasury-to-offer-low_cost-bank-accounts-for-tax-returns
