As the tax deadline approaches, a lot of people will be getting a refund back from the IRS. If you’re one of these people, then you know you can get your refund in one of several ways. You can get the money directly deposited in your account, or you could get a check sent to you in the mail.
However, there is another option that many larger tax-preparation firms are offering: getting your tax refund on a debit card. Many firms even encourage their clients to take this option because of the convenience it offers.
However, getting your tax return on a debit card also has some drawbacks that tax-preparation firms don’t talk about. If you’re considering getting your tax return on a debit card, you’ll want to know how it can help you and how it might set you back.
Advantages of Getting Your Tax Return on a Debit Card
The biggest advantage of getting your tax return on a debit card is the turnaround. Once the IRS has approved your tax return, the firm will essentially give you an interest-free loan for the amount of your return, then use your actual return to pay off the loan. This is a good option if you really need your tax return.
If you don’t have a bank account, you also might want to get your tax return on a debit card. You won’t have to worry about carrying around a lot of cash or try to find a financial institution that will cash your check.
You might also want to get your tax return on a debit card if you want to keep your return separate from your main finances. For instance, if you want to buy a new appliance, keeping your tax return money in a separate account cuts down on the temptation to use it for anything other than its intended purpose.
Finally, some tax-preparation firms might even offer a bonus if you put your tax return on a prepaid debit card, and free money is rarely a bad thing.
Disadvantages of Getting Your Tax Return on a Debit Card
The biggest disadvantage to getting your tax return on a debit card can be summed up in one word: fees. Expect to pay a fee for almost every transaction. Even if the fee is only a dollar or two per transaction, it will add up fast—and wipe out whatever bonus you got in the process.
Even worse, some prepaid debit cards also have monthly maintenance fees, so if you were planning on not using your tax return for a few months, don’t be surprised if the amount is less than you were expecting.
Getting your tax return on a prepaid debit card also has a disadvantage that is harder to notice. A prepaid debit card makes saving harder, since you’ll have to withdraw the money and redeposit it.
Get the Most Out of Your Tax Return With First Alliance Credit Union
If you desperately need to get your tax return as soon as possible, then you might want to get the money on a prepaid debit card. If you can wait a week or two, though, you’d be much better off getting your tax return when the IRS sends out the payments.
If you want to get the most out of your tax return, become a First Alliance Credit Union member today. You only need $5 to open up an account, and once you do you’ll be able to deposit your tax return money into a savings account, club accounts, money market accounts or even a Certificate of Deposit (CD). Plus you won’t have to worry about paying a fee every time you use your First Alliance debit card.
Want more tax refund information? Check out this episode of our Good Money Moves podcast where we talk about smart ways to use your tax refund.