|Volume 6, Issue 1, 2006||Federal Reserve Bank of Dallas|
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New Product for Unbanked Taxpayers
The fastest way to obtain an income tax refund is to file electronically (refund is generally received seven to 10 business days from date of electronic filing). However, taxpayers must have a bank account when they file their return to receive an electronic refund. The alternative, filing by mail and waiting for a paper check, will add weeks to the process.
Many low-income taxpayers who seek assistance with income tax return preparation do not have bank accounts. Unbanked customers often think the only way to get their refund quickly is by obtaining a high-cost refund acceleration loan from a paid tax preparer. Many financial institutions view tax-filing season at VITA sites as an opportunity to reach new customers by opening accounts for those who are unbanked, therefore providing an opportunity for direct deposit of their refund.
In an example of an innovation to reach the unbanked, Chase has developed the Chase Direct Benefit Card designed for use by unbanked and underbanked low-income wage earners. The card is offered in conjunction with the bank's national EITC/tax preparation campaign. Like traditional accounts, Direct Benefit Card accounts include a routing number and an account number, which are required to file a return electronically and receive a refund by direct deposit.
The card is available to all consumers regardless of credit or account history and is specifically for individuals receiving a federal check for IRS tax refunds, Social Security benefits, Supplemental Security Income benefits and veterans' benefits. The cardholder has multiple ways to access the stored funds at no additional charge beyond the monthly maintenance fee.
Other features of the card include unlimited ATM transactions and balance inquiries at Chase and Bank One ATMs, unlimited PIN purchase and cash-back transactions similar to a debit card issued by most banks, and unlimited VISA purchases. Chase has announced that the Direct Benefit Card will be available for use during the 2005 tax-filing season. For more information, call 1-888-CHASE-11 (choose option #1, then #5).
e-Perspectives, Volume 6, Issue 1, 2006