Tax refund on prepaid debit card - another dumb idea

[disneysteve]

Yesterday, I posted about ATM cards linked to 401k accounts. Just last night, I saw a commercial for H&R Block tax prep. They will give you a prepaid debit card for the amount of your tax refund. Just one more incredibly stupid idea. That way, you are certain to spend it rather than even consider saving any of it. Of course, you could still be responsible and just use it to pay for things you'd be buying anyway like groceries and gas, but you know the average person is going to look at it as free money and hit the mall with that card.

[rob62521]

I saw that ad too, Steve, and thought, yet another way to get a consumer to be stupid about money.

[maat55]

I agree, if debt reduction or investment was the use for the money, the debit card would hurt you.

[irmanator]

in my opinion they are marketing to the people not so financially wise anyway. I mean who else would pay like 400$ to do your taxes when you could go on the web and do it for free or very cheap. I had a conversation with a young guy at work I offered to do his for him for free, he said he couldn't wait 2 weeks for his refund so he paid to get it that night. its crazy. Then a week later he was asking if we had Rent a centers in NY (he moved from texas because our company bought his and moved it) so he could get a table for his house. I just walked away shaking my head.

[kilapapipa]

I can't believe how many people get big refunds. I use a percentage and may pay or get back from $0-$300. We are teachers and our annual salary is very predictable so that makes it easier. I have talked to others at school about keeping more of their money each month and putting it in retirement or the like and they say they need the big refund to pay off Christmas or something.

[neguy11]

I work at a student loan company and we've had a few people calling in lately to use these exact cards to make their payment.

A lot of people who get these huge refunds have a lot of kids, so they get the child tax credit and also may be low income and qualify for EIC.

You'd be amazed at how many people rely on these just to pay their monthly bills. Not sure what they do the other 10 months or so after the refund is gone

[poundwise]

If one is obtaining a "refund anticipation" loan, one has already entered the realm of dumb ideas.

[dardhel]

On the other hand, its a great idea if you are a shareholder of H&R Block (HRB).

[Jazzmint98]

I definitely agree that this is a poor idea.

[parafly]

These types of promotions have been going on for a while. I know that Turbo Tax has similar types of programs, which could actually pay off if used wisely.

For example, they give you a $25 gift card to Macy's for $23 of your return...or something along those lines.

[disneysteve]

Originally Posted by parafly

These types of promotions have been going on for a while. I know that Turbo Tax has similar types of programs, which could actually pay off if used wisely.

For example, they give you a $25 gift card to Macy's for $23 of your return...or something along those lines.

That's nice, unless you happen to be the average American with 8K-10K in credit card debt and really have no business going to Macy's at all.

[parafly]

Originally Posted by disneysteve

That's nice, unless you happen to be the average American with 8K-10K in credit card debt and really have no business going to Macy's at all.

Totally agree with you there, but for those of us in good financial situations and without credit card debt, it's a good deal. Don't generalize and label the program as an "incredibly stupid idea" when it could be beneficial to people who use it properly and under the right circumstances.

[disneysteve]

Originally Posted by parafly

Totally agree with you there, but for those of us in good financial situations and without credit card debt, it's a good deal. Don't generalize and label the program as an "incredibly stupid idea" when it could be beneficial to people who use it properly and under the right circumstances.

No offense intended. Even though I'm one of those folks in good financial standing with no consumer debt, I still wouldn't want my tax refund (if I got one, which I don't) on a Macy's gift card or any other prepaid card. I'd want it direct deposited into my bank account where I can immediately put it somewhere where it earns interest.

[Diolla]

Alot of the people who use H&R Block don't have a checking or savings account to put the money in. They get a check (either from the IRS or H&R Block and then have to pay a check cashing fee to get their money.

The H&R Block card allows them to get their money with no check cashing fee or to use it as a debit card and pay bills instead of paying to cash the check and THEN paying for a money order to pay their bills.

Actually some of them have their paychecks direct deposited onto it and use it year round like a weird type of checking account (with no overdraft fees because you can't overdraft it)

For some of these people the debit card is the only 'bank account' they can get.

[krayziebone33]

I think that if you can avoid having to put your money on a prepaid card, then you should. Its much better to have the money direct deposited into an account of your choice.

[disneysteve]

Originally Posted by krayziebone33

I think that if you can avoid having to put your money on a prepaid card, then you should. Its much better to have the money direct deposited into an account of your choice.

If we're talking a relatively small amount, like a couple hundred dollars, it really doesn't matter. So you use it to get gas or groceries. But if you are getting a refund of a couple thousand or more, which is not all that unusual, it seems not such a good idea, though Diolla makes an interesting point that most of us don't think about.

[project15]

Also, the commercials that brag about getting money straight from the agent the day you file rather than waiting for a check from the IRS bother me. I'm sure the agent is taking a hefty percentage of that refund check.

[disneysteve]

Originally Posted by project15

Also, the commercials that brag about getting money straight from the agent the day you file rather than waiting for a check from the IRS bother me. I'm sure the agent is taking a hefty percentage of that refund check.

Yes, the refund anticipation loans are big business and cost the customer a fortune. It amazes me that anyone falls for this. It only takes about 2 weeks to get your refund if you e-file. You've got to be pretty desperate to pay 200% interest plus fees to get a refund loan.

[LivingAlmostLarge]

Did I tell you I thought it was stupid? Get this, Liz Pullman Weston thinks it's okay. Sigh. What an stupid idea. I can't tell if she's sarcastic or not

A 401(k) debit card?! It's not so bad - MSN Money

[disneysteve]

Originally Posted by LivingAlmostLarge

Did I tell you I thought it was stupid? Get this, Liz Pullman Weston thinks it's okay. Sigh. What an stupid idea. I can't tell if she's sarcastic or not

A 401(k) debit card?! It's not so bad - MSN Money

I think you meant to post that to my 401k debit card thread. Someone mentioned her article. I actually think she makes some good points. I wasn't aware of all the details. In some ways, the debit card makes more sense than the traditional 401k loans. So if you must borrow from your 401k, the debit card may be the better way to do it.