MyAccountCard Is a Giant Step towards Accounts for All

Treasury announced the launch of its pilot program to open new accounts for the underbanked in a press release yesterday. The pilot will send out offers in the mail to 600,000 low-income households which will allow them to receive their tax refunds on a Visa-branded debit card that simultaneously opens an account with direct deposit, debit card and electronic payment features. Bonneville Bank, the community bank in Utah affiliated with the pilot, will offer cardholders customer support and additional services along with Green Dot, a prepaid financial services company, and Visa. The pilot aims to create a secure means for taxpayers to claim their refunds and provide an account that continues to be useful beyond tax time. It also saves the government an estimated $40 million by reducing the costs of tax refund administration. Good bye costly paper checks, hello streamlined electronic transfers.

The launch is exciting for us at New America as we have been eagerly watching the development of this program (see our past post on the pilot here). Limited access to secure financial products is a major barrier to building precautionary savings and other longer-term assets for low-income households. Prepaid debit cards have emerged as a way to provide bank-like services to the underbanked. Unfortunately, some card programs, like the Kardashian sisters and Russell Simmons-branded cards, have been accused of offering the prepaid debit cards with predatory fees (see here). Predatory practices are sadly no stranger to rapidly developing financial product markets (for more see here). The Treasury recommended MyAccountCard, in contrast, has no point-of-sale, network ATM or cash back fees. There are limited and clearly defined fees for withdrawals made at a non-network ATM and to load cash at certain retail locations (see product features here). It looks like MyAccountCard is striving to be a model for others in the market to emulate, offering high-quality functionality along with reasonable and transparent fees. If this effort helps us learn how to effectively connect families with high-quality and low-cost financial products during the tax filing process, it will be a huge step forward for low-income consumers.

One of the most exciting aspects of the pilot is its attempt to gain more insights in the low-income consumer market. As part of its experimental pilot design, Treasury will send each household one of eight offers. The eight offers differ slightly to determine what promotional message is most accepted, whether a linked savings account is attractive and whether a monthly-fee of $4.95 to cover possible administrative costs is feasible. More detailed data on low-income consumers in the prepaid debit card market should be useful to Consumer Financial Protection Bureau (CFPB) regulators and financial institutions as both seek to encourage productive financial products for people building a nest egg for stability and future life goals.    

Speaking of building a nest egg, it’s great to see Treasury utilizing tax time to help lower-income households gain access to financial services and encourage asset-building. As outlined in New America’s Saver’s Bonus policy proposal, tax time is one of the best opportunities during the year to set aside a meaningful amount of savings. This isn’t a revolutionary concept as the federal government already provides hundreds of billions of dollars in savings and asset building incentives through the tax code. However, 90% of these tax benefits are geared towards households with incomes over $50,000 a year. Lower income families should also have incentives available to build savings during tax time. The Saver’s Bonus proposes a savings match up to $500 for lower-income families who report savings contributions made to an eligible account during the previous year or split part of their federal income tax return to an eligible account. With all these exciting new developments around tax time, April 15^th doesn’t seem like such a bad day after all.