Debit cards are in these days. From tax preparation firms to state governments, organizations that provide access to tax refunds are providing consumers with more options, and debit cards are among the most popular.
Tax preparation services such as Jackson Hewitt and H&R Block are targeting over 25 million taxpayers who do not currently have a checking account, using pre-paid debit cards as an alternative way to speed a cash refund to their customers.
Similar to pre-paid calling cards, the pre-paid Visa or MasterCards carry a balance and can be used anywhere those brands are accepted. Taxpayers without checking accounts are especially fond of the tool, since it provides them ready access to their money without worrying about not having a bank account to deposit and access their money from. Issuing companies benefit because of fees that are applied on the front end and for each transaction, generating additional revenue back to the company.
Using pre-paid debit cards is not new. Merchants across the country have discovered the value of pre-paid cards as gift certificates for use in the store. Some companies are using payroll cards as an alternative way to pay their employees. States are using the cards to disburse alimony and child support payments. And in South Dakota last week, the Governor announced he is planning on using debit cards to provide low income families a tax break on sales tax they pay on food items.
"What we discovered is it's easier, it's less intrusive. It's simpler to administer, less costly to administer if we use a debit card," said the Governor of the plan.
Not everyone agrees that the debit cards are a good idea. Jean Ann Fox, director of consumer protection for the Consumer Federation of America, expresses concern about the cards and encourages consumers to use the traditional banking system for complete safety and security. "That way, you get all of your refund without so many fees," she said, "and you're protected under the banking regulations."