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Credit Card Applications » News » Other » Georgia to Issue State Tax Refunds on Debit Cards

Georgia to Issue State Tax Refunds on Debit Cards

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Georgia to Issue State Tax Refunds on Debit Cards

Taxpayers in Georgia who don’t have bank accounts will get a little help from their state government because they may be able to receive their tax refunds on a debit card. Georgia joins the federal government, which announced in January that it would offer 600,000 low- to moderate-income taxpayers to receive their refunds via a debit card rather than a paper check.

The Underbanked

Millions of U.S. households are “underbanked” — they do not qualify to establish a basic checking or savings account. Without a bank account, there is nowhere to deposit a tax refund check. Many of the underbanked must turn to check-cashing services that charge a fee.

Purchases

Debit card tax refund options benefit consumers, whether they are underbanked or not. The primary benefit of issuing tax refunds on debit cards is the flexibility. Recipients can use the refund card like they would any debit card to make purchases at stores, online or to pay bills to creditors that accept debit or credit card payments. Taxpayers with bank accounts can deposit the money on the card as they would a check.

Pilot Programs

The U.S. Treasury actually mailed out four slightly different kinds of cards — some offer a linked savings account, and some will charge a $4.95 monthly fee — with several different marketing messages in an attempt to find the most effective approach.

The ultimate goal is to eliminate paper refund checks entirely. The government spends an estimated $1 per paper check, including the cost of reissuing lost checks, while electronic transfers cost about 10 cents each. The pilot debit card program is expected to cost $1.5 million.

Consumer advocates have praised the plan, but some Congressional Republicans are skeptical. In a letter to Treasury Secretary Timothy Geithner, Reps. Dave Camp of Michigan and Charles Boustany of Louisiana raised concerns about the fees and said the plan had started as a simple program and “morphed” into a plan to provide bank accounts, which they said was a task better handled by the private sector.

Georgia is also running the debit card program as a pilot program. Of taxpayers who choose to receive their refunds as a paper check instead of a direct deposit, some will be chosen to receive a card. The taxpayers with the cards will be asked for feedback via an online survey.

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