Teachers and coaches often talk about the "teachable moment," an opportune time for bringing home a lesson to a student or athlete. Credit unions reaching out to unbanked consumers may find tax preparation season to be their own "teachable moment," a prime time to interest unbanked families in CU offerings like savings or checking accounts.
The Center for Financial Services Innovation has just released a report on the ways financial institutions as large as Bank One/Chase and as small as Alternatives Federal Credit Union are using tax preparation partnerships to make this connection.
The report explores six opportunities for linking financial services and tax prep for underbanked filers:
- traditional saving/checking accounts, into which refunds can be direct-deposited;
- alternative refund anticipation loans, which offer the expected speed along with financial education and lower fees than traditional RALS;
- stored-value cards, an alternative depository for refunds;
- Individual Development Accounts, a way to double or triple the tax refund's value;
- retirement savings,involving the Retirement Savings Contribution Credit that low-income tax filers can receive for their first $2,000 contribution to an IRA or 401(k) and;
- refund splitting where, starting in tax year 2006, consumers can divide their refunds between a check mailed to their home and a savings account, for example.
The report includes examples of each type of program as well as their successes and challenges. "Programs that have had the greatest success tend to be those that have built strong relationships among the partners involved, have engaged in aggressive marketing and outreach, and have reduced barriers or offered special incentives," the report's authors conclude.
The Center for Financial Services Innovation, an initiative of ShoreBank Advisory Services, was founded in 2004 with support from The Ford Foundation.
Read case studies of how credit unions are Reaching the Unbanked and Making a Difference, free reports published by CUES with funding from the Ford Foundation.
Link to our Skybox archives for more about H&R Block's entree into underserved markets.
Also, read "Talking Taxes" and "Tax Time = New Members" in our Credit Union Management magazine archives.
