Linking Tax Refunds and Low-Cost Bank Accounts

This paper was commissioned for Inclusion in Asset Building: Research and Policy Symposium, an event hosted in September 2000 by the Center for Social Development at Washington University in St. Louis. A version was subsequently developed for publication in Inclusion in the American Dream: Assets, Poverty, and Public Policy (Oxford University Press, 2005). The papert presents findings from an evaluation of the Extra Credit Savings Program (ECSP). Piloted in Chicago by ShoreBank and the Center for Law and Human Services, the program was designed to connect unbanked households to mainstream financial services and to facilitate ongoing asset accumulation in low-income households by linking tax refunds to low-cost bank accounts. The program targeted households eligible for the Earned Income Tax Credit, encouraging filers in those households to save the 1999 federal tax refund in a no-fee, no-minimum-balance savings account. A 10% bonus was offered for funds remaining in the account in December 2000. The findings are suggestive for researchers and policymakers engaged in efforts to improve the financial well-being of vulnerable families. The results are also relevant for financial institutions seeking to enhance their Community Reinvestment Act ratings