Better Than a Check?

Yesterday the Treasury Department announced their plan to end mailing checks to Social Security, SSI, Railroad Retirement, OPM and VA recipients by March, 2013. Taxpayers who are receiving the benefits will have the option of having their money directly deposited into their own bank account or loaded on to the Treasury's Direct Express Debit MasterCard. The plan is expected to save over $300 million in the first 5 years. Currently, the debit MasterCard is an option to Social Security recipients.

I was a little concerned reading about the debit MasterCard. I have upon occasion offered a debit card as part of the RAL or bank program for tax returns and honestly was less than happy with the programs. While I like like the e-Collect program I'm currently using, I do not push the use of cards because of the usage fees involved. And several area employers use a debit card for employees who don't have bank accounts and, again, the fees are outrageous. However, the Express Debit MasterCard seems to be operating on the same fee structure that the debit card tied to my checking account, next to none. There are no monthly or transaction fees. The fees seem to be tied to ATM withdrawals out of their network or purchases out of the US. So that worry is gone.

Currently, there is no plan to include IRS refund to the program. Kay Bell at "Don't Mess With Taxes" suggests the IRS is holding off until a procedure to make sure refunds are not mis-directed into the wrong account is in place. I wonder if there is concern about the paperwork and cost to set up a one time deposit of refund? (Let's face it, taxpayers who would only use a debit card for their tax refunds would be high maintenance; needing new cards each year, forgetting/ losing their account info.) The costs of my "free" debit card are covered by the interest the bank receives from using my money. Even with a Social Security recipient, their money is withdrawn over the course of the month and could be invested. But, too often, a tax refund is spent within days of receipt and it would earn very little in interest. Not enough to cover the costs of starting an account. Although, the ability to add a refund to an existing card might be a good first step.

It looks like the Federal Government is moving us one step closer to being a cash less society. Next step is for the IRS to come up with a plan to safely and inexpensively put refunds on debit cards for taxpayers who can't maintain a bank account.