Credit and Debit Card Ratings

Should You Put Your Tax Refund On A Prepaid Card?

By Curtis Arnold and Lucy Lazarony

All the major tax preparation companies give you this option, but does it make financial sense?  Here’s a look at the pros and cons of receiving a tax refund via prepaid cards with direct deposit.

Fast access to your tax refund. Need a faster tax refund?  E-filing your return and requesting a tax refund be sent to a prepaid card with direct deposit or a bank account is the fastest way to go, according to the IRS website. The IRS is issuing refunds to taxpayers in as few as 10 days for those who e-file and opt to receive their tax refund by direct deposit.

“Direct deposit is typically better,” says David Newville, senior policy analyst at the Center for Financial Services Innovation. “You’re going to get it quicker and it’s going to be more secure than a check.”

Pocket that tax refund, pronto! (Photo credit: Tax Credits)

Keep tax refund money separate from other accounts. Have a special project in mind for that tax refund but worried the money will disappear quickly amid your day-to-day spending? Putting a tax refund on a prepaid card will keep the money separate from your other accounts.

“You might not want to dump it into a bank account because it might get lost in day-to-day charges,” says Ben Jackson, a senior analyst at the Mercator Advisory Group.

Watch out for fees. The biggest downside to receiving your express tax refund on a prepaid card is the assortment of fees associated with prepaid cards.

Joe Ridout, a spokesman for Consumer Action, a San Francisco-based consumer advocacy group, sees no advantage to receiving a tax refund on a prepaid card, especially for people with bank accounts who could simply opt to receive a direct deposit of their tax refund into a checking or savings account.

“If you have a bank account, there’s no advantage whatsoever to getting your tax refund on a prepaid card,” Ridout says. “You needlessly would forfeit some of your tax refund with the fees that come with these cards.”

Ridout added that prepaid cards may be appealing to consumers without bank accounts but the fees associated with prepaid cards can make them a costly choice. “The best money saving solution for consumers is to open a bank account,” Ridout says. “Because these cards are a solution that will cost you money.”

Still, opening a bank account may simply not be possible for some people. And while it is certainly true that far too many prepaid cards charge fees that don’t make a speedy refund a wise choice, there are some exceptions. Shane Tripcony, of BestPrepaidDebitCards.com commented, “Typically, bank accounts such as free checking accounts are cheaper to operate, but for some people, the built-in limitations such as no overdraft fees make prepaid debit cards a viable alternative.  As fewer banks are offering free checking accounts, the prepaid card option becomes a good choice, despite differences in fees.  It is all in how you will use the account.”

In fact, if you are considering a prepaid card for your tax refund, here are some low-fee options that will take the smallest bite out of your money.

Serve from American Express . There simply aren’t many fees associated with Serve, American Express’s consumer-friendly prepaid debit card. There’s no activation fee, it’s easy to dodge the $1 monthly account charge and, importantly, cash withdrawals from MoneyPass ATMs are also free. It’s easy to get your federal tax refund sent quickly to your Serve account and, yes, there’s no charge.

U.S. Bank Convenient Cash Card. Another good option, particularly if you live in an area with plenty of U.S. Bank ATMs, is the U.S. Bank Convenient Cash Card. Like most prepaid debit cards, it’s a snap to get your tax refund loaded for free onto a U.S. Bank Cash Card. But what sets it apart from other options is that cash withdrawals from U.S. Bank ATMs are free, as are direct deposit and bill pay.

Chase Liquid. With 5,500 Chase branches nationwide, it’s easy to withdraw the tax refund you get loaded onto the Chase Liquid prepaid card without incurring an unwanted ATM charge. For a $4.95 monthly account charge, Chase Liquid makes it simple to avoid a long list of other fees as well.  It makes the card a worthy option for receiving a quick, relatively fee-free tax refund.

But remember, because fees on prepaid cards vary so widely, it’s important to study the terms and conditions on prepaid cards carefully before signing up for one.

Author: Curtis Arnold

  • Should You Put Your Tax Refund On A Prepaid Card?

    Should You Put Your Tax Refund On A Prepaid Card?

    By Curtis Arnold and Lucy Lazarony

    All the major tax preparation companies give you this option, but does it make financial sense?  Here’s a look at the pros and cons of receiving a tax refund via prepaid cards with direct deposit.

    Fast access to your tax refund. Need a faster tax refund?  E-filing your return and requesting a tax refund be sent to a prepaid card with direct deposit or a bank account is the fastest way to go, according to the IRS website. The IRS is issuing refunds to taxpayers in as few as 10 days for those who e-file and opt to receive their tax refund by direct deposit.

    “Direct deposit is typically better,” says David Newville, senior policy analyst at the Center for Financial Services Innovation. “You’re going to get it quicker and it’s going to be more secure than a check.”

    Pocket that tax refund, pronto! (Photo credit: Tax Credits)

    Keep tax refund money separate from other accounts. Have a special project in mind for that tax refund but worried the money will disappear quickly amid your day-to-day spending? Putting a tax refund on a prepaid card will keep the money separate from your other accounts.

    “You might not want to dump it into a bank account because it might get lost in day-to-day charges,” says Ben Jackson, a senior analyst at the Mercator Advisory Group.

    Watch out for fees. The biggest downside to receiving your express tax refund on a prepaid card is the assortment of fees associated with prepaid cards.

    Joe Ridout, a spokesman for Consumer Action, a San Francisco-based consumer advocacy group, sees no advantage to receiving a tax refund on a prepaid card, especially for people with bank accounts who could simply opt to receive a direct deposit of their tax refund into a checking or savings account.

    “If you have a bank account, there’s no advantage whatsoever to getting your tax refund on a prepaid card,” Ridout says. “You needlessly would forfeit some of your tax refund with the fees that come with these cards.”

    Ridout added that prepaid cards may be appealing to consumers without bank accounts but the fees associated with prepaid cards can make them a costly choice. “The best money saving solution for consumers is to open a bank account,” Ridout says. “Because these cards are a solution that will cost you money.”

    Still, opening a bank account may simply not be possible for some people. And while it is certainly true that far too many prepaid cards charge fees that don’t make a speedy refund a wise choice, there are some exceptions. Shane Tripcony, of BestPrepaidDebitCards.com commented, “Typically, bank accounts such as free checking accounts are cheaper to operate, but for some people, the built-in limitations such as no overdraft fees make prepaid debit cards a viable alternative.  As fewer banks are offering free checking accounts, the prepaid card option becomes a good choice, despite differences in fees.  It is all in how you will use the account.”

    In fact, if you are considering a prepaid card for your tax refund, here are some low-fee options that will take the smallest bite out of your money.

    Serve from American Express . There simply aren’t many fees associated with Serve, American Express’s consumer-friendly prepaid debit card. There’s no activation fee, it’s easy to dodge the $1 monthly account charge and, importantly, cash withdrawals from MoneyPass ATMs are also free. It’s easy to get your federal tax refund sent quickly to your Serve account and, yes, there’s no charge.

    U.S. Bank Convenient Cash Card. Another good option, particularly if you live in an area with plenty of U.S. Bank ATMs, is the U.S. Bank Convenient Cash Card. Like most prepaid debit cards, it’s a snap to get your tax refund loaded for free onto a U.S. Bank Cash Card. But what sets it apart from other options is that cash withdrawals from U.S. Bank ATMs are free, as are direct deposit and bill pay.

    Chase Liquid. With 5,500 Chase branches nationwide, it’s easy to withdraw the tax refund you get loaded onto the Chase Liquid prepaid card without incurring an unwanted ATM charge. For a $4.95 monthly account charge, Chase Liquid makes it simple to avoid a long list of other fees as well.  It makes the card a worthy option for receiving a quick, relatively fee-free tax refund.

    But remember, because fees on prepaid cards vary so widely, it’s important to study the terms and conditions on prepaid cards carefully before signing up for one.

  • Target Speeds Move to EMV Cards

    Target Speeds Move to EMV Cards

    Target has vowed to do what it can to speed the US’s transition to more secure payment card technology.

    In testimony before the Senate Judiciary Committee, Target Chief Financial Officer, John Mulligan, said that one of the company’s responses to the massive data breach that impacted tens of millions of its customers in late 2013 would be to equip all 1,800 of its U.S. stores with card readers able to process EMV card transactions by the beginning of 2015. The new timeline announced by Mulligan is over six months earlier than Target’s previously stated goal for implementing smart card technology in its stores. EMV cards, also known as smart cards, are considered far more difficult for hackers to compromise than the magnetic stripe technology currently used by most credit and debit cards.

    Additionally, Mulligan told lawmakers that Target’s own REDcards will also transition entirely to EMV technology. “Updating payment card technology and strengthening protections for American consumers is a shared responsibility and requires a collective and coordinated response,” Mulligan said. “On behalf of Target, I am committing that we will be an active part of that solution.”

    Target is undoubtedly motivated to speed up its move to EMV technology by the avalanche of negative attention and subsequent hit to its profits caused by the data theft. Still, most security experts believe it’s the right move. EMV technology is a far tougher nut for data thieves to crack than magnetic strip technology, which has long been the security norm in the U.S. Because EMV cards contain a microchip that must be authenticated with a personal identification number – hence the technology’s other name, chip and PIN – they are far less vulnerable to identity fraudsters than magnetic swipes.

    In countries around Europe and throughout the globe, the fact that EMV cards are standard has reduced the amount of identity theft significantly. The replacement of magnetic strip technology with EMVs certainly won’t end data theft altogether. As Mulligan noted in his Senate testimony, Target cannot force the whole country to embrace EMVs. It will require broad support from other retailers and card issuers for all U.S. consumers to get the benefit of the elevated protection offered by EMV cards.

Credit and Debit Card Ratings