Millions of people love prepaid cards for their ease of use and wide availability. Find out how taxpayers are reaping all the amazing benefits offered by the leading prepaid cards this tax season.
With tax season underway, many people are looking for the safest and fastest way to get their income tax refunds. For this reason, millions of taxpayers have opted to have their refunds sent directly to a new or existing prepaid card.
Prepaid Cards Can Help You Receive Money Faster
According to IRS statistics, the average refund is about $3,000. Additionally, it’s estimated that approximately 70 percent of tax refunds are sent directly to financial institutions to be deposited in savings or checking accounts. This can take time many people don’t have.
However, funds loaded to a debit card by direct deposit are available instantly. This can be a lifesaver for taxpayers who find themselves in financial difficulty, since some banks don’t release funds immediately.
The IRS Supports Prepaid Card Refunds
Even the IRS understands the importance of expediting tax refunds. In 2011, the agency spearheaded a large-scale pilot project that distributed prepaid cards to over 80,000 tax refund deposits.
The IRS reasoned that providing prepaid debit cards would help taxpayers access their funds sooner than they would if they used direct deposit to a traditional bank account. Additionally, these individuals would also save money in check cashing fees and be less susceptible to theft.
The project did not see a significant rise in new taxpayer enrollments. However, the fact is that many Americans already use prepaid cards. Furthermore, they prefer to receive their tax refunds this way.
Prepaid Card Deposits May Be Less Costly
Another reason prepaid cards are a preferred option for depositing income tax refunds is that the US Treasury can reduce costs by minimizing the amount of paper checks printed, as well as the postage used to distribute funds. However, prepaid card benefits don't stop at the government level. Consumers have long realized the many benefits of using a prepaid card as an alternative or supplement to a traditional bank account.
Most major prepaid cards issuers also advertise that deposits to prepaid cards are credited sooner than deposits to most banks. The cards can also be used to help taxpayers avoid the excessive tax preparation fees associated with refund anticipation loans.
Prepaid Cards Are More Convenient
Prepaid card issuers widely advertise that taxpayers can get their money much sooner than using a traditional Banks direct deposit. But just how fast can a taxpayer expect to receive their funds?
Taxpayers who electronically file their tax returns and have their refunds deposited onto a prepaid card can see refund in as few as 10 days from the IRS acceptance date. Most prepaid cards provide account alerts via email or text message. That way, taxpayers can be delete notified as soon as their funds are available.
Avoiding mailed checks is one of the biggest advantages to getting a tax refund deposited onto a prepaid debit card. Not only is it faster, it’s also safer. This is because there is no risk of the deposit getting lost, stolen, or even accidentally destroyed. Sadly, there are many people who prey on those who receive refund checks. Some thieves even go so far as to look in mailboxes for tax refund checks.
Prepaid Cards Make Budgeting Easy
Another reason people love prepaid cards is because prepaid cards help them manage their money more effectively. This is exactly why many people prefer to have a large sum of money like a tax refund deposited onto a prepaid card.
If someone is concerned about keeping money separate for a specific purpose, a prepaid card may be one of the best ways to do this. There's no need to worry about hidden costs and fees, and there is no way to spend money that has not been loaded to the card.
Tax Preparers Are Also Offering Prepaid Options
The IRS is not the only entity to try their hand at prepaid cards for the purpose of depositing tax refunds. The largest tax preparers in the country have also incorporated prepaid debit cards into their service offerings.
Even companies that don’t have their own dedicated prepaid cards have found a way to incorporate them into their business model. For example, in 2016, TaxACT collaborated with a popular card issuer. TurboTax went from offering its own prepaid card to collaborating with an industry-leading prepaid card issuer. Other tax-preparation companies are likely to follow suit.
Taxpayers who choose to put their tax refunds on prepaid cards should be mindful of a few things. All associated fees should be understood, and taxpayers should plan accordingly. This is especially true for ATM fees, as these can add up quickly. You may also incur fees from both your card issuer and the bank that maintains the ATM. If you wish to get cash, it’s usually easier to request cash back when making a purchase.
Consumers have made it clear just how much they value the option of prepaid cards in their everyday transactions throughout the year. Since these cards are so widely available and easy to use, more taxpayers are expected to get refunds on these cards in the future.
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