Despite Promise, Federal Tax-Refund Debit Cards a No Go

New York Times
January 8, 2013
Carrns, Ann

A Treasury Department pilot program that issued prepaid debit cards to low- and moderate-income families during the 2011 tax season is "a concept with a promise" but will not be renewed this year due to low uptake last year, a Treasury official has confirmed. It was hoped that the option would save the government money by reducing the volume of paper checks sent out, while helping low-income filers avoid expensive refund anticipation loans. It also was considered a way to better serve "unbanked" taxpayers, who could continue to use the card for everyday financial purposes -- such as payroll direct deposit, ATM withdrawals, and bill payment. However, a report from the Urban Institute found that although roughly a third of the cards issued through the MyAccountCard program were used in the first months, the remaining two-thirds of individuals who received cards never used them. The report said it could be that people found the "multiple steps" needed to use them "cumbersome." It suggested that in the future, such accounts be low-cost, easy to use, and available early in the tax season to encourage their use.
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