Pros and Cons of Prepaid Tax Refund Debit Cards

They’re convenient if you don’t have a bank account, but they can also be costly

Reviewed by Lea D. Uradu
Fact checked by Yarilet Perez

If you’re paying someone to prepare your taxes for you this year and expect a return, they may give you the option of receiving it as a prepaid debit card. While that might seem like a great convenience, some aspects are worth considering, such as hidden or multiple fees or limits.

Learn more about prepaid tax refund debit cards so you can decide whether they are an option for you.

Key Takeaways

• Many tax preparation services allow you to choose to load your tax refund onto a prepaid debit card.
• A prepaid debit card might be useful for someone without a bank account, for convenience, or to expedite their refund.
• Many prepaid tax return debit cards have fees that can reduce how much of your refund you’ll be able to use.

Advantages of Tax Refund Debit Cards

Tax preparation services like H&R Block, Jackson Hewitt, TaxAct, and TurboTax all make prepaid cards available to their customers. Proponents of the cards point to these advantages:

• Useful if you don’t have a bank account
• Helpful if you want your refund a bit sooner
• More convenient than a check

Advantages Explained

If you’ve chosen not to use a bank, you won’t be able to receive your refund via direct deposit, the IRS’ preferred way of sending out refunds. These cards give you an alternate method of receiving your return.

It’s usually faster for the U.S. Treasury Department to deposit your return onto a prepaid debit card than into a bank account or for you to receive a refund check in the mail. According to H&R Block, if you e-file your return, you can typically expect a direct deposit within 21 days, while a check may take 21 to 28 days. If you file a paper tax return, the wait will be longer because of the time involved in processing paper returns.

Checks must be cashed to receive the funds, you’ll need an account at a bank or credit union. These cards remove this need and make it easier to access your return if you get it via check.

If you do have to cash a check and don’t have a relationship with a bank, some big-box stores, like Walmart, and major grocery chains, like Kroger, cash checks for much lower fees, typically less than $10. Payday loan businesses might charge you much more, so it helps to be wary of businesses that might charge too much.

Disadvantages of Tax Refund Debit Cards

If you don’t have a bank account, receiving your refund on a prepaid debit card can be convenient. However, that convenience generally comes with disadvantages:

• High and multiple card use fees
• Risk of loss
• Maximum daily withdrawal limits
• Out of network ATM fees

Disadvantages Explained

Many prepaid tax return debit cards come with multiple fees. For example, H&R Block’s Emerald Prepaid Mastercard charges a $3.50 fee for using the card to get cash at all automated teller machines (ATMs) plus any fees the ATM operator might charge. If you haven’t used your card in more than 60 days, H&R Block will charge you an inactivity fee of $9.95 per month. To check your balance at an ATM, you’ll be charged $1.

TurboTax’s Turbo Prepaid Visa Card charges $4.95 a month unless you’ve loaded at least $1,000 on it in the preceding month (the first monthly fee is waived regardless of the amount); in-network ATM withdrawals are free, but out-of-network ones cost $2.50.

A prepaid tax return debit card might seem convenient, but it is a card that you’ll carry around and be responsible for. If you lose your wallet, the card falls out, or you forget it at a store or restaurant, you might lose what’s left of your tax return—or the entire amount, if you lose the card before you can use it.

The retail giant Target has a reloadable account card into which you can deposit your tax return. In addition to fees, this card has a withdrawal limit of $750 per day. If your tax return exceeds this amount, you’ll need to withdraw it over multiple days and transactions. If you don’t use an Allpoint ATM (in a Target store), you’ll be charged $2.50 plus any ATM operator fees.

Minimizing Prepaid Tax Return Debit Card Fees

There are some things that you can do to minimize your fees. First, check the card agreement to make sure you understand the fee structure. For example, if you have H&R Block’s card, you’ll want to make sure you use it at least once every 60 days to avoid the monthly fees. With the TurboTax card, if you aren’t able to load another $1,000 on it each month (such as through direct deposit of your paycheck), you may want to spend down your balance in as few months as possible.

An even better alternative may be to open a bank or credit union account, even if you previously believed that you didn’t have enough money to be eligible for one. For example, some credit unions, designated as low-income credit unions (LICUs), have low minimum balance requirements, offer check cashing services, and even make small loans.

Can I Get My Tax Refund on a Prepaid Debit Card?

Yes. However, it’s important to be aware of any fees or limitations before agreeing to have your return deposited to a prepaid debit card. Depending on your circumstances, it might be more beneficial to use or open a checking or savings account.

How Do I Get a Tax Refund Debit Card?

Many tax preparers have agreements with financial institutions for tax refund prepaid debit cards. Some retailers, such as Target, offer these cards as well.

Does the IRS Send Refunds on a Debit Card?

The IRS (via the U.S. Treasury) only sends refunds through checks or direct deposit. If you want a prepaid tax refund debit card, you’ll need to use a tax preparer with that service.

The Bottom Line

Receiving your tax refund through a prepaid debit card can be convenient and a little faster than waiting for a check or deposit, and it is an option for people who don’t have a bank account. However, you also may be subject to multiple fees or other limitations, which will whittle away at your refund. If you decide to go this route, be sure to read the card agreement so that you can avoid as many fees as possible.