This year a select group of Americans will get their tax return in the form of a pre-paid debit card. This pilot program is being launched by the US Treasury Department to cut the expense of paper checks and also aid the “unbanked population” that do not have bank checking accounts to receive refunds. This recent news article supports the fact that electronic transactions via credit and debit card are easy, efficient and will soon become the standard for payment transactions in our society.
It is also clear that the paper check is becoming antiquated quickly. With online bill pay, payroll direct deposit, and electronic rent payment services (such as www.rentpayment.com), both consumers and businesses are using paper checks less and less. This group now includes the United States Government!
Internet purchases, payroll, and now tax refunds are all making use of electronic payments, but what about person to person transactions? Most people still use cash and checks for interpersonal payments such as gifts, yard sales, friendly loans etc… However, trends indicate that there will a time when all these transactions will be electronic as well. One company leading this revolution is Square (www.squareup.com). Square “enables anyone to accept credit cards anywhere” by using a mini credit card swiper that plugs into a cell phone or an iPad. This enables person to person transactions, and is also an excellent solution for small businesses.
Think about how many checks you wrote 5-10 years ago, and how many you write today. I’m willing to wager that this number has dropped significantly. As the tail-end of generation Y become adults, familiarity with the internet and electronic transactions is more and more prevalent. In addition, much of this generation does not own a checkbook. It is undeniable that electronic payments are the future!
Check out this article posted by The Wall Street Journal:
WASHINGTON—The U.S. Treasury Department plans to launch a pilot program Thursday to deliver tax refunds through prepaid debit cards, an effort to cut the expense of paper checks and aid lower-income taxpayers who don’t have bank accounts.
About 600,000 low- and moderate-income taxpayers nationwide, a slice of those earning about $35,000 or less annually, will receive letters inviting them to activate a debit card that can receive direct deposits.
The Treasury Department’s new program will deliver some tax refunds on prepaid debit cards, giving recipients an alternative to check-cashing outlets.
The program will cost the government about $1.5 million and marks the latest federal effort to send fewer payments by mail. The U.S. still issues an estimated 45 million paper checks a year for tax refunds. Each one costs the government about $1, including the cost of processing roughly 600,000 claims a year for missing checks. Each payment by direct deposit costs the U.S. about 10 cents.
“My goal, one that’s been talked about for many years, is to get out of the check-payment business,” said Richard Gregg, Treasury’s Fiscal Assistant Secretary and one of the officials overseeing the program.
At the same time, officials across government have been exploring how to nudge consumers who don’t have bank accounts toward lower-cost financial-services providers. An estimated nine million households—about one in every 12—don’t have bank accounts, according to a Federal Deposit Insurance Corp. survey……. >>> View the full article
