Planning for tax-time savings
This report presents the results of a large-scale field experiment that the tax preparation company H&R Block (the Company) conducted in collaboration with the Consumer Financial Protection Bureau (the CFPB). The field experiment investigated whether customers could be encouraged, through consumer communications with and without the offer of a small financial incentive, to use a savings feature on a prepaid card to save a portion of their tax refunds from all sources, including state and federal refunds. The CFPB was particularly interested in whether consumers who receive the Earned Income Tax Credit (EITC) would be receptive to messages about saving.
The Company encouraged tax-time saving through consumer communications. In December, 2016, before the tax filing season, the Company sent two different types of emails to its prepaid card customers: (1) an email simply encouraging customers to use the savings feature on the prepaid card at tax time; and (2) an email offering small monetary incentives ($5.00) to encourage customers to use the same feature at tax time. The Company used randomization as part of the trial in order to send either one of the two emails to its prepaid card customers. As part of the randomization, some customers were assigned to not be sent any savings-related emails, and these customers served as a comparison for those who did receive savings-related emails.
While take-up of the savings feature was low, results show the savings-related emails from the Company increased customers’ likelihood of using the prepaid card savings feature. These savings persisted beyond the end of the tax filing season, with about 24 percent of customers who deposited into the savings feature during the trial period maintaining savings about eight months after the tax season ended. Among the subset of customers who deposited during the trial period and consented to provide their tax data, those who used a refund anticipation check (RAC) were significantly less likely to deposit into the savings feature at any point during the trial than those who did not use a RAC, and those with larger EITC were more likely to save during the trial period.