This tax season, some shoppers could be walking out of Walmart with thousands in cash. On Tuesday, the company announced a new service that will let taxpayers “skip the check” and collect their tax refunds at Walmart stores across the country.
Here’s how it works: You have your taxes done at one of 25,000 outside tax preparers that offer Walmart’s “Direct2Cash” option and choose the service, which will cost you another $7 at most. Once you get a confirmation code, you go to Walmart and pick up your refund, in cash.
Walmart says its cash refund service is the first of its kind. The Internal Revenue Service lets you collect your refund a couple of ways. The simplest and fastest is to route your refund to your checking or savings account via direct deposit. If you don’t have a bank account or don’t want to use direct deposit, you can get your refund by check.
However, without a bank account, cashing a check can be expensive. Walmart reports that tax preparers charge clients a $20 fee to receive a refund by check. Then, Walmart says, you sometimes have to pay 1% to 2% of the check amount to a check cashing service to get your money. Last year, the average tax refund was $3,096, according to the IRS—which means you could pay more than $80 to get your refund.
Many Americans could face such a steep fee: About 9.6 million households had no bank account in 2013, according to a survey by the Federal Deposit Insurance Corporation.
But if customers pay only $7 at the time of filing, and Walmart doesn’t collect its own fee when customers pick up their checks, what’s in it for Walmart?
“It’s always a good thing to have customers in our stores who have jingles in their wallets and their pockets,” says Daniel Eckard, senior vice president for services for Walmart.
For customers, however, there’s a catch: Because you have to do your taxes at one of the 25,000 participating tax prep locations, you can’t take advantage of the IRS’s online tax-filing service, which gives you access to free online software if you earn less than $60,000. And if you make less than $53,000, you usually qualify for free in-person assistance from an IRS-certified volunteer (search irs.gov for a site near you).
So while you will pay no more than $7 to get your refund in cash, you may have to pay someone for the actual tax prep. Eckard says the costs will vary “on a preparer by preparer basis.”
The average cost for tax preparation is $246, according to a survey from the National Society of Accountants. Simple returns can be cheaper: The average cost of filing a Form 1040 and state return without itemizing deductions is $143.
“It’s not just how much it costs you to cash the check. It’s the sum total cost of what it costs you to get your money,” says Brett Theodos, senior research associate at the Urban Institute. “The costs of tax prep are going to outstrip the costs of check cashing, but they still add up.”
Your cheapest option is to file your taxes for free and open a bank account where you can deposit your refund.
While banking fees have been on the rise, making it hard to maintain an account when you’re financially squeezed, MONEY has surveyed the 70 biggest banks in the country to uncover the ones with the most generous terms. Use our Bank Selector tool to find the best one for you. Or see if you’re eligible to open an account at a local credit union, which usually offers lower fees and higher savings yields. Here’s how to find the credit union for you.
If you can’t or don’t want to open a bank account, you might be able to get your refund on a prepaid debit card. New York, Georgia, Louisiana, Oklahoma, Connecticut, and South Carolina let you receive your tax refund on a state-issued debit card, Bankrate reports. Some paid tax preparers will also load your refund onto their own prepaid cards. But prepaid cards may carry fees that cut into your refund, and if your prepaid card is lost or stolen, you could be out the money.
“Some of these account cards that are attached to institutions can actually be not-great deals,” Theodos says.
And if you do need to cash a check? At least one big retailer is now vying for your business. “It’s interesting—Walmart has emerged as the lower-cost place to cash your check,” Theodos says. “They must be viewing this as a successful business model.”
Correction: This story was updated to correct Daniel Eckard’s quote. He said “jingles,” not “jiggles.” We regret the error.