For many individuals, especially during these uncertain times, a tax refund can feel like a godsend. It’s a nice way to get a little bit or, in some cases, a lot of extra money to use as you see fit. And, these days, some tax preparers are offering a new way for you to receive your refund: via a gift card or prepaid debit card. In many instances, preparers will allow you to load all or some of your refund onto your card of choice.
If you’re given this option, you may wonder whether or not it’s a good one. Ultimately, that choice is yours to make, but it’s important to inform yourself about this option.
The Pros and Cons of Gift Cards
There are definitely some upsides to loading your refund onto a gift card. For one thing, you may sometimes get bonus funds as a “thank you” for doing so. There also don’t tend to be any added-on fees with a gift card. Plus, if your plans were to buy something with your refund from a retailer that accepts your gift card, it just makes sense.
On the downside, though, not every tax preparer will offer this option. Plus, you may not have as many protections as you would with a traditional debit card if your gift card ends up lost or stolen. Remember, too, that you can’t take your refund out as cash or use it anywhere except via approved retailers, which limits your options. These cards can also encourage spending instead of saving, which is rarely a smart strategy.
The Pros and Cons of Prepaid Debit Cards
Another option your tax preparer may offer or that you can utilize yourself is to load your money onto a prepaid card. These cards work just like a normal credit or bank card except you’re simply spending your own money.
You never have to worry about overdrafting or the fees that go along with it, and this card can be an excellent choice if you are unable to open a traditional bank account for some reason. Be aware, though, that many of these cards charge high fees for withdrawals, loading money onto the card, and more.
As you can see, less traditional options like
these do have pros and cons. It’s important to weigh them carefully and to talk
with a financial professional about your choices. If you take those steps, any
decision you make is sure to be a wise one for your particular needs and
circumstances.