Advantages and Disadvantages of Prepaid Tax Refund Debit Cards

If you want to get a tax refund this year, your tax preparer can give you the option of receiving it in the form of a prepaid debit card. While that may seem like a major comfort, there are a few downsides to consider. This text explores the pros and cons of pay-as-you-go tax refund playing cards.

Key points to remember

  • Many tax preparation providers offer the option of having your tax refund deposited directly to a prepaid debit card.
  • This can be an alternative for people who don’t have a checking account, don’t need to wait for a check to be mailed, or don’t need to use a check cashing service. expensive.
  • Nevertheless, these prepaid debit cards can have many fees that can reduce the value of your refund for those who are not careful.

The Benefits of Tax Refund Playing Cards

Tax preparation providers like H&R Block, Jackson Hewitt, TaxAct, and Turbo Tax all charge their customers as you play cards. Proponents of the level of playing cards have these advantages:

If you don’t have a current account. Lack of a checking account prevents you from receiving your reimbursement by direct deposit from this method. You could still get it in the form of verification, but you might need money to verify somewhere. While legal guidelines vary from state to state, check cashing stores, such as payday mortgage companies, generally charge about 3% of the face value of the check for this service. So if you receive a refund of $3,000, you may only walk away with $2,910. (Be aware that for those who need to pay a check and don’t have a relationship with a financial institution, some big box stores, like Walmart, and major grocery chains, like Kroger, cash checks for many less fee, sometimes less than $10.)

So that you are reimbursed a little earlier. Asking the Division of the Treasury to deposit your tax refund immediately, both into a checking account or a prepaid debit card, is normally sooner than ready for a refund check to be in the mail. According to H&R Block, if you file your return electronically, you can sometimes expect a direct deposit within 21 days, while an audit can take 21 to 28 days. If you are filing a paper tax return, the wait will likely be longer due to the time it takes to process paper returns.

If you don’t believe the courier. Checks, after all, can get misplaced in the mail, which can be a specific problem for those who have recently moved. Thieves have also been known to break into mailboxes at tax time looking for refund checks.

The Disadvantages of Tax Refund Playing Cards

If you don’t have a checking account, receiving your refund on a prepaid debit card can be convenient. However, this comfort comes at a price, which is the first disadvantage of à la carte debit cards:

The fees could also be excessive. H&R Block’s Emerald Pay as you go Mastercard, for example, charges a $3 fee for using the card to get cash from an ATM and an inactivity fee of $4.95 per month. if you haven’t used your card for 60 days, among other charges. TurboTax Pay as you go Visa card fees $4.95 per month unless you loaded no less than $1,000 on it in the previous month (main monthly fee waived regardless of amount); In-network ATM withdrawals are free, but out-of-network ATM withdrawals cost $2.50.

There are some things you can do to lower your fees. First, check the packing of the cardboard to be sure to correctly perceive the construction of the load. When you have the H&R Block card, for example, you might need to make sure to use it at least once every 60 days to avoid monthly fees. With the TurboTax card, if you’re unable to load an extra $1,000 each month (such as by direct deposit from your paycheck), you may have to spend your balance in as few months as practical. .

A great alternative could also be to open a bank or credit union account, even if you previously thought you didn’t have enough money to have one. For example, some credit unions, referred to as low-income credit unions (LICUs), have low minimum stability requirements, provide check cashing services, and even make small loans.

How long do tax refunds last?

The Inside Income Service says it reports more than 90% of refunds within 21 days. If you are filing a paper return, however, the wait is more likely to be longer.

How can I test the status of my tax refund?

The IRS website has a “Where is my refund?” device you must use to verify your refund within 24 hours of e-filing or six weeks after submitting a paper return.

How do I know how much money I have on my Pay as you go card?

You will normally be able to check your stability online or by calling the Cardboard’s automated customer support number toll-free. Before using an ATM to check your stability, however, check your cardholder’s settlement to see if any fees apply.

Are Pay as you go debit cards insured?

Many, but not all, pay as you go debit cards are insured by the Federal Deposit Insurance Company. However, this insurance coverage covers you provided that the financial institution holding your funds goes bankrupt, and not against the loss or theft of your card.

The back line

Receiving your tax refund through a prepaid debit card can be convenient and a bit sooner than ready for a check, and it’s an option for people who don’t have a checking account. However, you may also be subject to numerous fees, which may reduce your reimbursement. If you decide to go this route, remember to learn the cardboard rules to avoid as many charges as possible.