Low Fees and Early Marketing Encourage Prepaid Card Use for Tax Refunds

by Mercator Advisory Group 0

A study by the Urban Institute and the Brookings Institution found that low fees and early marketing encouraged people without bank accounts to use prepaid cards for getting tax refunds. The study examined prepaid card use by low income people to get their 2010 federal tax refund. From the study:

We evaluated a Treasury Department pilot program called the Tax Time Account Direct Mail Pilot program. Under the pilot, a random sample of 800,000 adults who live in households with income under $35,000 and are unbanked or use alternative financial services products (e.g., refund anticipation loans/checks or payday loans) were offered prepaid card accounts to get their 2010 federal income tax refunds electronically. The pilot was designed to measure how different card features and messaging affect sign-up rates and subsequent card use. One feature—card cost—had a big influence on whether people chose to participate.

The study focused on the features that would maximize adoption and according to the authors, the rate of adoption was about the same whether marketing materials focused on convenience or safety, which suggests that cardholders were evaluating the cards by different criteria. Understanding the criteria used by cardholders can go a long way to better program design and more effective prepaid programs.

Click here to read more from the Christian Science Monitor.

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