Treasury Department launches program to deliver some tax refunds on debit cards

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The federal government wants to say goodbye to the paper tax-refund check, and Thursday launched a pilot program to let some people receive their money on a debit card.

Next week, the Treasury Department will send letters to 600,000 low- and moderate-income taxpayers offering them the option of signing up for a special MyAccountCard Visa pre-paid debit card. There are two goals: save the government the expense of mailing paper checks while providing taxpayers without bank accounts quicker access to their refunds.

In 2010, the Treasury Department said it spent $40 million to mail approximately 45 million paper tax-refund checks, money that could have been saved if the payments were made electronically. About 63% of taxpayers got their refunds electronically last year, which the department said allows for faster access to the money. Also, paper checks are sometimes lost or stolen, and people without bank accounts often must pay fees to cash them through private check-cashing services.

The Treasury Department is also touting extra benefits of the prepaid Visa cards, which are being offered through Bonneville Bank. [Updated at 8:30 a.m.: The program manager for the cards is Green Dot Corp. of Monrovia, the largest player in the prepaid debit card industry.]

People can use the cards to receive their work paychecks through direct deposit, pay bills online and withdraw money without service fees from about 15,000 ATMs nationwide.

‘This innovative card can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely and conveniently, giving users more control over their financial futures,’ said Deputy Treasury Secretary Neal Wolin.

At this point, the only way to get a card is if you are mailed a letter from the Treasury Department offering it; the letter will include a special registration number. As part of the pilot program, people who receive the letters will be randomly offered cards with different features and fee structures to determine what would be the best options when the program is expanded. Some of the cards, for example, will have a $4.95 monthly fee.

The Treasury Department is also launching another pilot program to encourage thousands of people who are paid through electronic payroll cards to have their tax refunds loaded onto those cards. The department said it would work with payroll provider ADP on the program.

-- Jim Puzzanghera