New research shows that Refund Transfers (RTs) provide substantial value to unbanked individuals and, on the whole, improve consumer welfare. The study was conducted by John Friedman, Assistant Professor of Public Policy at Harvard University’s Kennedy School and a Faculty Research Fellow at the National Bureau of Economic Research, and his findings were published [PDF] in BNA’s Banking Report.
Like any product, RTs provide great value to some consumers, while being not optimally used by others. Unlike most financial products, though, RTs charge only a one-time fee of about $30, so that the most a consumer could possibly lose is the fee. In contrast, some consumers (who are often those in the most dire circumstances) may gain well over $100 from the purchase of an RT. In addition, RTs may play an important role in encouraging low-income taxpayers to take-up federal transfer programs such as the EITC.