How to Avoid Fees on Tax Debit Cards

Connecticut taxpayers who declined the direct deposit option for a state tax refund received a debit card.

Jared Kotler, of West Hartford, is a sophomore at George Washington University, but he is old-school when it comes to his tax refunds.

"I like having the check, seeing what I got back from them," Kotler said.

Kotler is one of many Connecticut taxpayers who declined the direct deposit option for a state tax refund.

Instead of receiving a paper check, he was surprised to receive a debit card. The Department of Revenue Services said recipients can use the cards to pay bills, go shopping or withdraw cash. However, most debit cards come possible fees.

"I find it a little troubling that I'd be charged if I wanted to use my card at my own bank," Kotler said.

Kotler is a Bank of America customer. The tax refund debit card is issued through Chase and People's United banks. Customers can only use the card three times at a rival ATM before being charged a fee.

"Since I go to school in D. C., there aren't any Chase or People's ATMs within distance to my campus so it's just inconvenient for me," Kotler said.

People's United ATMs and branches might be plentiful in Connecticut, but Chase locations are limited outside of Fairfield County.

However, the state anticipates most recipients will draw down their cards before incurring any fees.

"We would be surprised if folks were drawing down that often," DRS Commissioner Kevin B. Sullivan said.

Sullivan said Chase outbid other banks by offering the best deal to the state and the decision to use debit cards instead of paper checks will save Connecticut $300,000.

"We think, ultimately, it will turn out to be for consumers and taxpayers a more convenient way to receive a refund," Sullivan said.

Still, recipients must know how much is on the card before they buy something. For example, if you have $40 on your card, a cashier cannot try to deduct a $50 item. You would have to tell the cashier to take $40 off the card before you pay the difference.

There is also an expiration date on the card.

If you activate your card, but don't use it for a year, Chase will charge your card a $1 monthly fee.

Any money left after three years goes back to the state treasurer's office and, if a debit card is not activated within one year, your full refund returns to the state to await claim.

"Think of a stale check. It's the same thing," Sullivan said. "Even a piece of paper that wouldn't be cashed is gonna be stale at some point in time if it comes from the state of Connecticut or anyone else."

Sullivan said you can avoid any potential fees by simply depositing the refund money into your own bank account. The DRS said there won't be a charge to replace your card if you only lose it once.

Taxpayers who receive more than a $5,000 refund can still receive a paper check if they decline the direct deposit option.

Learn more about the program on the state’s Web site

http://www.ct.gov/drs/cwp/view.asp?a=1462&q=491676
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