News

Debit cards to replace checks for Connecticut tax refunds

February 3, 2012

Connecticut’s four-year contract with JPMorgan Chase to issue income tax refunds using debit cards will reportedly cost the state about $25,000 a year, but will save the state about $290,000 a year in administrative costs and bank fees, said a news story at ctnewsjunkie.com.

Chase will use a 128-bit encryption system to safeguard information and will use a PGP or encrypted phone line to receive the data from the Department of Revenue Services in batches. Chase will contact Revenues Services within one day and issue the cardholder a new card and card number within two weeks if fraud is detected.

Additionally Chase will insure cards through the FDIC up to $250,000 per depositor. If the refund debit card is not used within a year of its issuance Chase will begin deducting $1 per year, which it gets to keep.

The debit card concept is new for those Connecticut taxpayers who are used to receiving income tax refunds by check (45 percent of filers last year). However the state is already using direct deposit and debit cards to pay unemployment benefits. Those services, which have been well received, are estimated to save the state more than $4 million in annual costs, said state treasurer Denise Nappier.

“Based on our due diligence, overall debit cards are more efficient and a cheaper method of disbursing tax refund payments, and the increased convenience and lower cost of debit cards should also benefit the unbanked and those who have not elected direct deposit,” Nappier said.

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