Daniel Wagner, AP Business Writer
WASHINGTON (AP) — A new Treasury Department program to give people without bank accounts faster access to their tax refunds will help some avoid costly short-term loans. But careless consumers could end up racking up fees and padding bank profits.
The pilot program using debit cards has two goals: steering Americans toward lower-cost ways of getting their refunds quickly, and saving the government the cost of printing and mailing checks and other overhead expenses.
"It's part of a broader set of initiatives ... to move toward the all-electronic Treasury," said Michael Barr, Treasury's assistant secretary for financial institutions. He said taxpayer savings are "a factor" in the move, but that Treasury sees tax time as an moment to encourage the use of lower-cost banking products.
Starting next year, the pilot tax account program will be offered to several hundred thousand Americans. Treasury will offer several different kinds of cards and study which are most effective. Eventually, the program could be expanded to reach the 9 million American households that don't have bank accounts.
For consumers, the debit cards will be virtually identical to checking accounts, though there won't be any checks. They will be insured like bank deposits and will shield consumers from having to pay for fraudulent purchases when cards are lost or stolen. In some cases, the cards will store other income and offer bill-paying services.
The cards' biggest advantage over paper checks is speed. People without bank accounts are more likely to borrow against their tax refunds and pay steep fees. That's because the checks can take six weeks to arrive — far longer than the eight to 15 days it takes to have your refund deposited in a bank account.