Starting this year, at least some underbanked or unbanked tax payers will be able to receive their tax refunds on prepaid Visa branded debit cards.
The consumers will be able to keep the prepaid cards after they have spent the refunds and use them as well to receive their wages by direct deposit, an executive at the Treasury explained.
"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. "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."
As part of the program, Treasury will send 600,000 consumers letters inviting them to accept and receive the cards in time for this year's tax season. The cards include free point-of-sale transactions, free online bill pay, free ATM cash withdrawals at more than 15,000 ATMs nationwide, and free cash back at participating retail stores, Treasury said.
Treasury is backing the program heavily to take advantage of the cost differential between the expense of writing and mailing a check to a consumer and the relatively inexpensive procedure to add funds to a prepaid card.
Consumer groups and technology advocates reacted with praise to the news.
"CFSI is pleased to see the Treasury's choice of a GRP card to deliver tax time accounts," said Melissa Koide, policy director for Center for Financial Services Innovation. "It bolsters the credibility of a quickly maturing market already well versed in serving low-income consumers. The pilot is an excellent start to bringing low-cost transaction and savings products to millions of tax filers."
CFSI said Treasury's program "was deeply informed by the Center for Financial Services Innovation's SAFE-T Accounts proposal," The proposal sought to present ways government and financial institutions could grow and improve financial products and services for the underbanked and unbanked.