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Volume 6, Issue 1, 2006   Federal Reserve Bank of Dallas

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).

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e-Perspectives, Volume 6, Issue 1, 2006

Federal Reserve Bank of Dallas Off-site page
Community Development Office Send an e-mail
P.O. Box 655906, Dallas, Texas 75265-5906
214-922-5377
Gloria Vasquez Brown Send an e-mail
Vice President
    Alfreda B. Norman Send an e-mail
Assistant Vice President and Community Development Officer
Jackie Hoyer Send an e-mail
Houston Branch
Senior Community Development Advisor
    Julie Gunter Send an e-mail
Community Development Specialist
Elizabeth Sobel Send an e-mail
Community Development Specialist
    Roy Lopez Send an e-mail
Community Development Specialist
The views expressed are the authors' and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Development Office.

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