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Tax Refund Options for Americans without Bank Accounts

Apr 4, 2008
Therefore, it is the dreaded tax filing season again, and you are faced with many questions. How should I prepare my return? Should I itemize my deductions? In addition, (if you are lucky enough to get a refund) how should I receive my refund?

In addition, although you do not really have a choice when it comes to paying your taxes, you do have options for receiving your refund. Some are:

1. Paper Check: If you prefer the old-school method of a paper check, select this option. You will wait longer, but have the satisfaction of taking that money all the way to the bank. If you electronically file, you will receive your check within three weeks. If you mail in your return, it will take six to eight weeks.

2. Direct Deposit: As long you have a bank account, this is a convenient option. You will get your money faster than waiting around for a check in the mail. Usually it takes 8-15 days to receive your refund if you electronically file. With a mailed-in return, expect it to take 5-7 weeks.

3. Cash Card: Not many people are aware of this option, but if you do not have a bank account, this may be the most convenient solution for you. Several tax preparation establishments offer the cash card as one of their refund options.

The terms of these cards will vary. Usually they are part of a refund product, like a refund anticipation loan. If you choose this product, your refund (minus applicable fees) will be loaded onto a card. This is known as a prepaid card, and works much like a debit card. You should also be able to reload the card with money. Depending on the refund product you choose, your money can be available as soon as the next day.

To the millions of Americans without a bank account, banking services (check cashing, money transfers, etc.) are either unavailable or very expensive. According to an article published May 4th, 2006 by Economist.com, more than twelve million households are 'unbanked' - without any sort of bank account. Without a bank account, services such as check cashing can come with expensive fees. In addition, saving and managing your money is difficult, because there is no way to electronically track spending patterns.

If you are one of these Americans without a bank account, you may want to consider getting a cash card from your tax preparer. Finding a retailer to provide this service will not be hard, though. Several of the leading tax preparation companies offer a card, as do many smaller companies. You will want to weigh the benefits versus the costs, and decide if this service is right for you.

In addition, what are these benefits? You do not need a bank account, or even a good credit history. You can only spend the amount available on the card, so it helps you manage your money. Your tax refund will be directly loaded onto your card, and you can have your paycheck directly deposited into your card account, thereby avoiding check-cashing fees. You will have access to a network of ATMs. With a good card, you will be protected from fraud (most cards are FDIC insured). You will also get the convenience of a card that has accepted pretty much everywhere--most cards are provided through MasterCard or Visa, so they are accepted wherever these cards are accepted.
As for the costs of these cards, you will want to do your research to find the best one for you. Some cards charge transaction fees, while some charge just a monthly maintenance fee. You will also want to find out if they charge to reload your card or for direct deposit into your card account.

Also check out the options for checking the account balance--some will charge you to inquire about your balance, while some will not. If you look around, you will be able to find the card with the lowest amount of fees for your situation. For example, if you are planning to use your card frequently, you will want to avoid a card that has per-transaction fees. On the other hand, if you use the card only for emergencies, the per-transaction fee might be better than paying a higher monthly fee.

While these cards are not for everyone, for many Americans they offer access to services they are not able to get otherwise. In addition, they provide fast and convenient access to your tax refund. If this sounds like a good option for you, look around to find a card you will feel comfortable using.
About the Author
Molly Winters-Hughes is a marketing consultant helping normal people make educated decisions about their finances. The ANEW prepaid Mastercard offers an opportunity to build or restore your credit rating. Find out more at http://www.theanewcard.com
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