Reasons to Get a Tax Refund Debit Card

Using plastic can help you get your money faster.

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This year, the government is piloting a tax refund debit card program where 600,000 low to moderate income families will be able to get their tax refund on a debit card, rather than a paper check. For the unbanked, this is an appealing alternative to a paper check because they can avoid check cashing fees, which can get very expensive on a high dollar check like their refund (the average refund check last year was over three thousand dollars).

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Should you try to get your tax refund on a debit card? It depends. If you have a bank account, it's best to get the refund direct deposited into your account. The debit cards offered by the government come in four flavors, with different fee schedules on each. If you have a bank account, it's best to just take the direct deposit, which happens to be the fastest option, and not mess with the debit card.

If you don't like direct deposit, you can always opt for a paper check if you don't mind waiting a little longer. If you don't have a bank account, you need to compare the cost of the debit card against the fees you'd pay at a check cashing place. If your refund is less than a thousand dollars, the fee to cash it at Wal-Mart is a mere $3. If it's between $1,000 and $5,000, then the fee is only $6 (Wal-Mart doesn't cash checks greater than $5,000).

Some of the debit cards offered by the government have a monthly fee of $4.95, which can make it very expensive after a few months. (As an aside, you should consider adjusting your withholding so your refund is as big this year.)

I suspect, given the low cost of cashing a government check at Wal-Mart, the tax refund debit card is not as attractive of an offer as many people initially suspected.

Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.