Glitch Puts Tax Refunds on Prepaid Cards for Thousands

About 8,000 Louisiana taxpayers recently received their tax refunds on prepaid cards or paper checks — unfortunately, that’s not what they wanted.

The taxpayers were supposed to have their refunds deposited directly into their bank accounts, but a computer glitch resulted in thousands of refund checks and prepaid cards instead, according to a report from the Associated Press.

Tim Barfield, the state revenue secretary, said the problem affected 8,000 out of 700,000 returns filed, and the revenue department is offering to cancel the prepaid cards and issue refund checks.

Options for Tax Refunds

It’s not like getting your tax refund on a prepaid card is a bad thing — obviously, you’d rather get your refund the way you prefer, but a prepaid card is a good option for some people.

Direct deposit is one of the fastest (if not the fastest) way to access your tax refund, but millions of Americans don’t have bank accounts, so that’s not an option. A prepaid card may be preferable to waiting for a paper check, then cashing it, and prepaid cards offer many of the conveniences of credit and debit cards.

However, prepaid cards often carry a slew of fees, meaning you might end up with less of your refund to spend on other things. Fees vary by card, so it’s important to read the card terms and conditions before committing to the product. Some common costs include monthly fees, ATM fees, inactivity fees and reload fees.

Another thing: Prepaid debit cards don’t necessarily carry the same consumer protections as credit cards or account-linked debit cards. If a card is lost or stolen, you may not be able to get all the money back.