Putting tax refunds on prepaid cards could benefit government

Woman holding credit card.


JEREMY HOBSON: Well, from corporate taxes to personal income taxes. There's a change coming this year from the IRS. For those earning less than thirty-six thousand dollars, it'll now be possible to get tax refunds on a prepaid debit card.

Marketplace's David Gura has that story.

David Gura: The pilot program was designed for taxpayers who don't have checking accounts. It'll also help the government. Ron Shevlin is a banking technology analyst with the Aite Group.

Ron Shevlin: This is clearly about their own benefit.

It costs $1 to mail a check, but just 10 cents to send out a prepaid card.

Richard Gregg: When we can convert everybody on the tax-refund side from checks to electronic, we can save about $40 million a year.

That's Fiscal Assistant Secretary Richard Gregg. The Treasury Department hopes low-income taxpayers will keep using the cards -- for bills and purchases.

Gregg: It's also an effort to try to provide a banking service to individuals who may not have a bank account.

If that works, that'll be good news for the Treasury Department's partners: The Green Dot Corporation and Bonneville Bank. They'll get to pocket fees for withdrawing money from out-of-network ATMs. Richard Gregg says the government's been upfront about that.

Gregg: We made sure that there won't be any surprises for the individual receiving the card.

In Washington, I'm David Gura for Marketplace.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.
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It makes sense for the Feds to reduce costs by finding a more efficient, less expensive to make payments to people without bank accounts. (How do those people get social security payments?) If a bank or business ends p making some money off it too, and it's a win-win-win situation, who cares. But it does raise suspicion when the ties between Obama and JP Morgan and such are pointed out. Unfortunately many of those making comments are right, true investigative journalism is pretty dead in America --- especially if anything could look bad for the current administration... Sad.

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I just received the packet from the United States Treasury on behalf of Visa in concert with Bonneville Bank etc., and my problem is that I made more than 36,000 and I have an existing bank account that I have used for the last seven years to deposit my refunds via ETF so my question is what is really going on?

Well for the record since there are no investigative reporters in media anymore. Bonneville Bank is a tiny brick and mortar bank in Utah. It will be purchased by Green Dot a servicer that receives more then 50% of its income from Wal-Mart. This was the only legal way for Wal-Mart to get into retail banking services

This is the same Wal-Mart that Hillary Clinton stood was on the board for six years, but I digress. Morgan Stanley is banker that runs Green Dot. Morgan Stanley through many clients and holding funds indirectly controls Green Dot. They also ran their public offering.

Under the theory that the stupidity of the public can never be underestimated, the administration issued a release that ties this to Bonneville banks, a bank with less then 40 million in assets end of fiscal 2008, as being offered the contract. It is under the Bonneville license owned by Green Dot, and controlled by Morgan Stanley, and with the Consent of Wal-Mart that this is happening.

Probably an equal story is how Wal-Mart with the Bonneville purchase by Green Dot, is in essence becoming a huge banking arm of Morgan Stanley. Yes basic investigative reporting would have a great story, with huge conflict of interest. You guessed it though this story will never see the light of day from lack of reporting. My father a Peabody award winning News man would roll over in his grave about the state of the American News media.

Several of the comments missed the point that a large number of people DO NOT have any bank accounts to have a refund deposited into directly. The issue of fees associated with the cards should fully disclosed. Several states already pay unemployment benefits in this manner. There are significant benefits for everyone concerned, but fees can be a problem.

Shame on The Obama Administration, but more shame on the American people, and what was once a proud independent American News Tradition! Just a week or two after Obama appoints the regional Chairman of JP Morgan to be his chief of staff they issue a contract to JP Morgan Chase to issue tax refunds to all citizens without bank accounts on cards that start accounts. This put billions of dollars into the JP Morgan Coffers, and gives them hundreds of thousands of new customers. I know JP Morgan was the second largest contributor to President Obama, and probably indirectly a contributor to most of the news media, one would think somewhere, Some how in the mainline media the concept of conflict of interest would come up.

I guess I'm missing what problem is being solved here. If the goal is to reduce costs of processing refunds, then the obvious solution is to do EFT exclusively (which is in the fractions of a cent per transaction once setup costs are paid), and address the issues of people without checking accounts by arranging with regional banks to create accounts for those who don't have them. The people who don't trust the banks can then just contact the regional bank, identify themselves, withdraw the money and do whatever they want with it without any ongoing fees, closing the account if they so desire.

I guess I'd need to know how much sending just a plain letter to a taxpayer costs to really evaluate it, but sounds like a nice windfall for the company that issues the cards.

Aren't pre-paid credit cards going to be a very attractive theft target?

What on earth are they thinking?

It's about a $1, to mail a check and $.10 to mail a pre-paid card, but what does it cost for an electronic transfer to an existing bank account? I don't want the government mailing me a pre-paid card. I want any refund (hopefully a very small one if my W-4 is completed correctly) deposited into my bank account. That's convenience. Hopefully this project doesn't to the point where we lose that option.

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