America's Paper Check Ban Leaves 6 Million in Digital Limbo

Every year, 6 million Americans receive their tax refunds as paper checks. For many, that money goes straight to groceries and rent payments. But starting this year, the paper check they've been waiting for simply won't exist.

That's the result of executive order 14247, signed by President Donald Trump in 2025, which directed the Treasury Department to stop issuing paper checks for tax refunds. All refunds now go electronic.

The Digital Divide Gets Real

The policy has clear benefits. Nacha, which runs the electronic payment network, estimates the government will save $68 million annually. The American Bankers Association is excited about reduced check-cashing fees, while supporters point to prevention of mail theft and check fraud.

But what happens to the "unbanked" – those 6 million Americans without bank accounts? The numbers tell a stark story: 23% of people earning under $25,000 were unbanked in 2023, compared to just 1% of those earning over $100,000.

Black and Hispanic Americans, young adults, and people with disabilities are disproportionately likely to be unbanked. One in five unbanked households includes someone with a disability.

From Bad to Worse: The Fee Trap

Low-income families rely on tax refunds for basics like food and rent. Even under the old system, unbanked people already lost chunks of their refunds to fees. Check cashers charge up to 1.5% for government checks in New York, up to 3% in California, and even more elsewhere.

In a post-check world, these fees could get worse. Unbanked taxpayers might turn to paid tax preparation services for refund loans – a market that federal courts and investigative journalists have exposed for false advertising and predatory pricing. Others might simply forgo their refunds entirely.

Geography and Race Shape Access

Where you live determines your banking options. Gaps in broadband coverage and lack of public transportation to libraries create computer access problems for poor and rural Americans.

"Banking deserts" – communities with few or no bank branches – force residents toward costly alternatives like payday lenders and check-cashing services. Black-majority communities face unique challenges: even middle-income Black families are more likely to live in low-income neighborhoods than low-income white families, making them more vulnerable to banking desert effects.

These barriers mean many Americans legally entitled to tax refunds could soon struggle to receive them.

Government Scrambles to Respond

The government knows there's a problem. The IRS promises "limited exceptions" for people without bank accounts, with more guidance coming. The day after Thanksgiving, the agency launched a campaign urging the unbanked to open accounts or check if their digital wallets accept direct deposits.

But it's unclear how effective these efforts will be. The American Bar Association is urging Treasury to keep issuing paper checks unless Congress passes actual legislation, rather than relying on executive orders.

Consumer groups want Treasury to fund robust exceptions, plain-language help lines, and no-fee default payment options while banning junk fees on refund-related cards and ensuring easy cash access at banks or retailers.

The challenge? Treasury has lost over 30,000 employees and $20.2 billion in funding since January 2025. Combined with lingering effects from the last government shutdown, implementing a new refund system for the 2026 tax season might be asking too much.