Having at least pierced the banking wall if not exactly torn it down, now the world’s largest retailer is offering to give customers their federal and state tax refunds in cash at a cost of no more than $7.
When Walmart launched its checking account service more than a quarter of U.S. households did not have a bank and that number probably hasn’t gone down very much in just a few months. Those so-called “unbanked” consumers don’t have a bank account that can receive a direct deposit and those are the customers Walmart is angling for.
According to the company’s Tuesday press announcement a consumer who receives an average $2,900 federal tax refund could pay a 2% charge ($58) to cash the check that already costs them $20 for the government to issue.
Through a partnership with a Green Dot company named Tax Products Group and Republic Bank & Trust Company, a holding of Republic Bancorp Inc. (NASDAQ: RBCAA), either Tax Products Group or Republic bank will send a customer a confirmation code as soon as their refund is ready to pick up. Customers can take that confirmation code together with identification to a Walmart story and get their refunds in cash. Customers sign up for the program at a tax preparation service that offers Walmart’s Direct2Cash option. Walmart said there are more than 25,000 participating tax prep locations that offer the option.
This could be bad news for check cashing companies QC Holdings Inc. (NASDAQ: QCCO) and a number of non-publicly traded firms. It may even have some impact on the Internal Revenue Service’s own scheme introduced in 2011 that loads a taxpayer’s refund on a prepaid credit card.
While the IRS can’t complain about competition, these small firms that now have to compete with Walmart are could start making some noise.
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