Do you need the Walmart Direct2Cash tax-refund service?

Walmart's announcement earlier this week that it would offer a faster, less expensive way for taxpayers to get their state and IRS tax refund in cash sounds promising, particularly for those who lack bank accounts. Taxpayers using the new, Direct2Cash service will pay no more than $7 to get their state and IRS refunds in cash. In contrast, a taxpayer with a typical, $2,900 IRS refund could pay a preparer $20 to arrange for a paper check, and another $58 to a check-cashing service charging a 2 percent fee.

But for anyone with a bank account, there's already a free and fast way to access to your funds: direct deposit. You merely provide your bank routing number and account number on your tax forms, and your state and IRS refunds go directly into that account. Then you can use a participating ATM to access your cash. You can even split your IRS refund into two or three different accounts.

Walmart touts the security of its Direct2Cash system. When taxpayers sign up through their tax preparers, their state and IRS refunds are then received by Tax Products Group (a Green Dot company) or Republic Bank. When those institutions receive the refunds, they e-mail taxpayers a secure code that they bring to a Walmart—along with appropriate ID—to get the cash. That, says Walmart, eliminates the problem of lost, stolen, or mishandled checks. And, noted Daniel Eckert, a Walmart senior vice president: "If you're taking your check to a check casher, it's easy pickings for less-than-upright actors." But, he added, if you're exiting a Walmart, no one knows you're loaded with cash. Taxpayers can get up to $15,000 through Direct2Cash: $7,500 from an IRS refund, and $7,500 from a state refund.

Direct deposit addresses security as well. While it's true that the IRS has had its share of tax-fraud issues, the system is still remarkably secure, and ensures that the money won't get lost in transit. And direct depositing your money means you won't be vulnerable walking around with a wad of cash.

For couples filing jointly, Direct2Cash isn't terribly convenient. Both spouses must be present at Walmart with ID to receive their cash. In contrast, with direct deposit into a joint account, you don't have to go together to a bank branch to withdraw the money.

Of course, security isn't an issue if you end up spending all that cash before you even leave the Walmart. And that's the biggest argument in favor of direct deposit: You stand a better chance of holding on to it for long- and short-term savings. That's important: A survey by Bankrate last summer showed that about a quarter of Americans have no rainy-day fund.

Check out Consumer Reports Income Tax Guide for expert advice on how to get the biggest state and IRS refund and spend the least in time and money on tax preparation.

If you want to try the Walmart Direct2Cash service, you'll first have to ask your tax preparer whether he or she participates. Walmart does not maintain a locator to identify participating preparers, but a spokesperson told me some 25,000 preparers are involved, including many Jackson-Hewitt and Liberty Tax centers.

A few other suggestions:

• Don't base the choice of tax preparer on whether he or she participates in Direct2Cash. Make sure the preparer has the proper qualifications and has dealt with tax returns like yours.

• Don't get all of your refund in cash or on a prepaid card. Ask your tax preparer to split your refund, direct-depositing most of your funds and using Direct2Cash for the balance. (Walmart says it charges a $3 fee to have up to $1,000 loaded onto a prepaid, Walmart MoneyCard.) 
• Make a shopping list before you arrive at Walmart, and stick to that list.
• Change your tax withholding. If you're getting a very big IRS refund, it might well be that you're having too much in taxes taken out of your paycheck each pay period. Why give the government the use of your money for a year or more? You should have use of it as soon as possible! You can estimate your withholding the IRS' withholding calculator. Then fill out and submit to your employer a new W-4. withholding form. You can get a copy from your employer, or download it from the IRS website.

—Tobie Stanger