Tax Season Push for Prepaid Cards

January 18, 2011

Unbanked is not always synonymous with poverty. In the United States, many working adults simply shun banks; their reasons are many, although cost and privacy concerns rank high. This presents a problem for the Treasury Department and the Internal Revenue Service (IRS), however, which are under instructions to transition outgoing payments from paper to EFT.

Enter Bonneville Bank. The Provo, UT bank has been selected to manage a Treasury Department pilot program for issuing tax refunds via Direct Deposit to prepaid debit cards, dubbed the MyAccountCard.

Actually, the program will be managed by Green Dot Corp., a leading prepaid card company that's awaiting regulatory approval of its purchase of Bonneville Bank. Green Dot owns and operates the Green Dot Network, which handles card reloads through an estimated 50,000 retail locations. Green Dot's most notable distribution partner is Walmart, which also holds an interest in the company.

Under the arrangement with Treasury, Bonneville Bank will be a repository for refund deposits and in turn issue prepaid Visa debit cards that enable recipients to collect refunds. And since the cards are reloadable, Treasury wants taxpayers receiving MyAccountCards to hold onto and use the cards for bill payments and other transactional purposes.

Beginning this week, Treasury is contacting, by post, 600,000 taxpayers who are believed to be unbanked, inviting them to have their 2010 tax refunds deposited to a MyAccountCard prepaid debit card. The cards feature free, online bill payments, free cash withdrawals at nearly 15,000 ATMs, cash back at participating merchants, and free Direct Deposit.

The FDIC counted 9 million unbanked American households in 2009.

The Federal Reserve reports that in 2009 there were 6 billion prepaid cards in circulation with about $100 billion in value.

In 2008, the average individual federal tax refund was $2,902, according to the IRS.

250 microfinance institutions made loans to Americans in 2007.