Tax refund loans getting cheaper? Don’t fall for it!
Tax refund loans (aka RALs) still an expensive quick cash option
Tax season is here, and some people may be wondering whether the quick cash of tax refund loans is right for them. The plain and simple answer to that question is that if you don’t mind giving up an expensive chunk of change, go for it. Otherwise, if you’d like to have access to fast consumer credit during a cash emergency, payday loans are a less expensive route in that they are generally free of “fees upon fees” and the charges levied by less than scrupulous tax preparers.
Even the IRS views tax refund loans with suspicion
The Web site Consumer Affairs reports that one of the biggest RAL institutions in the game – Santa Barbara Bank & Trust – has been ordered out of the tax refund loans business by federal regulators. Santa Barbara Bank & Trust was the money man for Jackson Hewitt’s tax refund loans, so now that big-name tax preparation company has to scramble to find funding for over half its locations. Republic Bank & Trust, another big tax refund loans player, has dropped their RAL prices as the industry faces the heat of consumer advocates.
8.4 million American taxpayers were robbed in 2008
By Consumer Affairs’ count, tax refund loans drained $738 million from their hard-earned tax refunds in 2008, just so they could receive their money a few days earlier. What an unnecessary expense; and that doesn’t even take into account $68 million in “other fees.” Then there were 12 million more people who gave up $360 million on products similar to tax refund loans. Consumer groups like the National Consumer Law Center and Consumer Federation of America are sounding the alarm for taxpayers to wake up and smell the tax refund loans ruse.
An IRS task force is examining tax refund loans
Until they’ve put this ultra-expensive product down like Ol’ Yeller’s evil twin, here some tips to avoid tax refund loans, RALs, RACs or whatever name tax preparers looking for a buck call them.
- File electronically to get your refund more quickly. Wait a week or two and you can save green!
- If you need help, use free sites offered by places like Volunteer Income Tax Assistance and the National Community Tax Coalition. Call the IRS at 1-800-829-1040 for more info. IRS Free File is also a place you should know about.
- Have your refund direct deposited. As check cashers typically charge two percent or more, it pays to have a checking account at a bank or credit union. Why pay $60 to cash a $3,000 refund check when you don’t have to?
- Know what you’re signing if you use a tax preparer. They can easily share or sell your tax return information, so if you see anything that gives them permission to do so, JUST SAY NO.
Tax refund loans can be dangerous; why not consider payday loans?