Prepaid Debit Card Reviews, Complaints, Etc

Tag: tax refund

  • 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.

  • Beware The Prepaid Debit Card Trojan Horse

    Beware The Prepaid Debit Card Trojan Horse

    The use of prepaid debit cards for tax refunds hurts the poorest citizens 

    by Curtis Arnold

    It’s a cliché, but it bears remembering: if something sounds too good to be true, it probably is. And to be sure, the prepaid debit card industry has a long and ongoing legacy of hyperbole, with card issuers saying plenty about the ease and convenience of their plastic products and precious little about often-predatory fees.

    Obviously, it’s no surprise whatsoever to see companies with wares to hawk ignore or downplay the perils of prepaid debit cards and instead tout their benefits. But increasingly it is presumably impartial and consumer-oriented governments that are extolling the wisdom of using prepaid debit cards to deliver tax refunds to the millions of Americans – 17 million adults, or 8 percent of all U.S. households, by the Federal Deposit Insurance Corporation’s (FDIC) latest tally – who lack bank accounts and can’t take advantage of direct deposit.

    The arguments government officials in states like Oklahoma, Connecticut and Virginia make in favor of utilizing prepaid debit cards to deliver tax refunds to so-called unbanked citizens sound persuasive. For the citizens themselves, receiving a refund via a prepaid debit card instead of a paper check means they’ll get their money weeks faster than if they had to wait for snail mail. Speed is no small matter for many low-income Americans who use their refunds to pay off high-interest payday loans that they may be forced to take while waiting for a check from the U.S. Treasury.

    The governments themselves also insist that prepaid debit cards are a boon to all taxpayers. The crux of the argument is that cash-strapped governments can garner big savings by delivering refunds electronically with prepaid cards instead of printing and mailing physical checks. At least one study reported that it cost nearly $1 more to mail a check than to deliver an electronic payment.

    In this era of belt-tightening austerity, that sort of taxpayer-saving government efficiency is to be cheered, right? Not exactly. Persuasive new research by John Friedman, an assistant professor of public policy at the Harvard Kennedy School, dismantles the deceptively alluring argument that tax refunds delivered on prepaid debit cards are good for everyone. In an article at Bloomberg Law, Friedman concedes that state governments can trim their own costs by switching from paper checks to prepaid debit cards. But the problem is that many of the hefty fees associated with prepaid debit cards – such as an account set-up charge and fees for taking money out of an ATM – are pushed off on to the taxpayers receiving the refunds. In his research, Friedman cites data from the now discontinued federal tax refund program in which taxpayers received money on a MyAccountCard. Recipients of refunds on that particular prepaid debit card paid an average of $19 during the first six months of use, an amount far and above the $1 governments save.

    What is particularly troubling about this rush towards offering – and sometimes actually mandating – those who don’t have bank accounts receive their refunds on prepaid debit cards is who is being impacted. Unbanked Americans are typically poor. Forcing the poorest among us to shoulder what amounts to a minimal government cost savings sounds too bad to be true. Unfortunately, it increasingly is.

Prepaid Debit Card Reviews, Complaints, Etc