Some come with effective interest rates from 50 to 500 percent.
April 01, 2008
Instant tax refunds are short-term
loans given to the consumer immediately after the tax preparer
files their taxes. The tax preparer will then receive the filer's
refund check two to three weeks later from the IRS. The effective
annualized interest rate for instant tax refunds range from 50
to nearly 500 percent, according to the National Consumer Law
Center (NCLC). Some tax preparers further gouge consumers by
tacking on administrative fees. According to the NCLC, consumers
took out more than nine million RALs in 2006; paying more than
$990 million in fees.
The fastest and most secure
way for consumers to get their refund is to file their taxes
online and then allow a direct deposit of the refund. Taxpayers
will receive the money in as little as 8 to 15 days. Some tax
preparation companies will help taxpayers set up bank accounts
to route the refund if accounts are not already established,
although the BBB advises consumers to work directly with financial
institutions to protect their account information.
Some tax preparers offer to
provide instant refunds on "convenient" debit cards.
These cards are another way for the tax preparer to make money.
Some debit cards include hidden fees, as high as $20 per transaction,
and can have limits on how much money consumers can access. This
means users have to pay the high transaction fees repeatedly.
If consumers are looking to
purchase specific high-priced items with their refunds, the BBB
encourages them to look into financing options other than RALs,
such as store credit promotions or offers that may provide better
If it is absolutely necessary
that a consumer receive their refund immediately, the BBB wants
people to know that it pays to shop around and look for a good
deal. Fees and rates for RALs vary by tax preparer.
Go to www.bbb.org to get a free reliability report on any company with whom you're considering doing business. The BBB reliability reports provide valuable information on companies.
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