Action Line: Feds end debit card tax-refund program
BY PHIL MULKINS World Action Line Editor
Tuesday, January 15, 2013
1/15/13 at 6:57 AM
Dear Action Line: Whatever happened to that federal government debit card program that was for direct deposit of tax refunds to people with no bank accounts? It was similar to the one the state of Oklahoma used for such refunds. - M.T., Tulsa
The federal government's MyAccountCard was a huge failure, attracting only 1,967 people out of 800,000 randomly selected from a population of 8 million adults likely to be low- and moderate-income (under $35,000 in household income). This was a three-tenths of 1 percent turnout - a huge flop. All of the people pitched on the plan were "unbanked" or "underbanked households" who have to pay a check-cashing service to cash their refund checks.
See an FAQ on Oklahoma's "Go Program" debit card at tulsaworld.com/GoProgramFAQ The debit card system was said, in summer 2011, to have saved the state $500,000 in check printing, labor, bank processing and postage expenses.
A Jan. 10 article in LowCards.com's Credit Card News, quoting the New York Times, said "the U.S. Department of the Treasury will no longer issue tax refunds on the MyAccountCard prepaid debit card." The card was used during the 2011 tax season as a pilot program for low- and moderate-income families.
Almost two-thirds of the people in the pilot program never used the cards. The MyAccountCard was a part of a Treasury study (tulsaworld.com/TreasuryDebitCards) using electronic delivery to provide tax filers faster and safer access to tax refunds. The program would help the government save money as the study found that electronic delivery is one-tenth the cost of a paper check. Electronic delivery of tax refunds by direct deposit is primarily used by upper-income families, not low- and moderate-income families.
The study found card fees were one reason many participants did not use the card. Charging a $4.95 monthly maintenance fee versus no monthly maintenance fee decreased MyAccountCard applications by 42 percent.
One benefit of debit card refunds was that it provided access to mainstream financial services and reduces low- and moderate-income tax filers' use of expensive alternative financial services for check cashing and the use of "refund anticipation checks."
The Treasury ended the program, but other states are adding refunds by debit card. Alabama just introduced refunds by debit card to reduce fraud as well as save money on processing, printing and mailing checks.
Original Print Headline: Feds end debit card tax-refund program
Submit Action Line questions by calling 918-699-8888, emailing phil.mulkins@tulsaworld.com, or mailing them to Tulsa World Action Line, P.O. Box 1770, Tulsa, OK 74102-1770.
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