Prepaid Debit Cards for Income Tax Refunds

Tax Act

Don’t look now but prepaid debit cards are making their way into our income tax system. Several State Governments and now the Federal Government are experimenting with ways to refund taxpayers directly to reloadable debit cards instead of the usual tax checks. I guess we shouldn’t be surprised.

For a few years now several government agencies on all levels – all the way down to the county and municipal levels – have been trying feverishly to cut costs. Well, it turns out that one of the more expensive things they do is cut checks in order to pay out benefits and tax refunds. And they can save a load of cash by switching over to debit cards.

A prepaid debit card is a natural for these kinds of transactions. The agencies don’t have to pay for the cost of producing or distributing the cards because many prepaid card companies are more than happy to do that. The companies foot that bill because they’re able to put their product in the hands of lots and lots of new customers. The prepaid companies figure that many of these new customers will end up being repeat customers so they stand to gain some long-term business. It’s a big win for them.

And of course it’s a big win for the government agencies too. They save a lot of money because their processes get more streamlined. Plus, they’re able to do it all more quickly too. That’s why you’re seeing such things as unemployment benefits, railroad pension benefits, and more being distributed via prepaid cards.

It’s even a win for the citizens who receive the refunds. That’s because each government agency is usually able to cut a nice deal with the card companies so the refund recipients pay no fees on the cards – so they get the cards for free. And the cards are immediately usable so there’s no check cashing necessary. It’s a pretty sweet deal all around.