Wal-Mart Stores Inc. is partnering with tax-preparation companies Jackson Hewitt Inc. and H&R Block Inc. to offer free tax prep at more than 3,000 stores in a move that could boost deposits into the retailer’s prepaid card account.
Wal-Mart, like its two tax-preparation partners, sells prepaid debit cards that its customers can use instead of traditional debit cards or bank accounts. By partnering with the tax companies, Wal-Mart now may encourage those customers to get their tax refunds loaded directly into their card accounts instead of receiving them via checks.
That could be a limited but significant boost for Wal-Mart’s prepaid program. Tax refunds provide a one-time but sometimes lucrative source of funds for consumers each year, especially for low-income taxpayers who can take advantage of certain tax credits. Low-income consumers also represent many of the so-called underbanked who are the main users of prepaid cards.
“For Wal-Mart, not only does it drive business into the store, it also extends the utility of their particular prepaid product,” says Madeline K. Aufseeser, a senior analyst with Aite Group. “To the extent that Wal-Mart can create a stickier environment for the card, it’s a great thing.”
The government returns more than $300 billion to consumers in tax refunds each year. Capturing even a sliver of that amount is an attractive boost for Wal-Mart and other nonbanks that sell alternative financial products.
Customers having their taxes prepared at Wal-Mart will be able to choose among a variety of prepaid cards, including the retailer’s own card, according to company spokesperson Sarah Spencer. Jackson Hewitt and H&R Block both offer prepaid cards that also will be available, she adds.
Customers also will have the option of having their refunds deposited into a bank account or sent as a paper check.
Those choosing to receive their tax refund via prepaid cards will have to weigh the fees involved in using those cards.
Wal-Mart generally charges $3 upfront for its card, plus $3 a month and $3 for each deposit. But the retailer waives the $3 card fee if the consumer deposits more than $1,000, which could be the case for many receiving refunds, says Wal-Mart’s Spencer.
H&R Block offers its card free when customers load their refund into the card account and does not charge a monthly fee; Jackson Hewitt does not charge upfront for a card loaded with tax refunds, but it assesses a $4.95 monthly fee. Customers using either card have to pay fees when reloading their cards using services from third parties, including Green Dot Corp.
This is the first year that the tax-prep companies will be helping consumers fill out the most basic 1040EZ tax form for free at Wal-Mart. Other services are available for a fee, though the companies did not disclose specifics.
Last year, Jackson Hewitt offered tax services at a smaller number of Wal-Mart stores, and charged $38 for the 1040EZ.
H&R Block spokesperson Gene King says the company was in Wal-Mart stores several years ago, but not in the past two years. The company offered free 1040EZ prep online and in stores last year, he adds.
Both Jackson Hewitt and H&R Block have dabbled in offering prepaid cards to tax-preparation customers for years (
In 2009, H&R Block agreed to a five-year extension of its debit card-processing agreement. H&R Block Bank issues the Emerald Prepaid MasterCard to its tax-preparation clients (
The world’s largest retailer walked away from its fight to win a bank charter years ago. But Wal-Mart continues to build it up its menu of financial products, including prepaid cards and checking cashing services, both of which customers can use to get their tax refunds.
Expanding its presence in the tax-prep market also may help shine a light on Wal-Mart as consumer friendly in the financial sphere, says Patricia Sahm, a managing director at Auriemma Consulting Group.
“It’s a helpful service. You have knowledgeable folks” helping customers prepare their taxes, and “that positions Wal-Mart potentially in a positive way when you think about the whole regulatory environment,” Sahm says.
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