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One Last Bite: Final Year For Bank Tax Refund Anticipation Loans

One Last Bite: Final Year For Bank Tax Refund Anticipation Loans

Consumer Advocates Recommend Cheaper Alternatives for Getting Refund Fast

BOSTON, Jan. 17, 2012 /PRNewswire-USNewswire/ -- A bright note for consumers as this tax season begins: This is the final year in which refund anticipation loans (RALs) will be available from banks on a large scale, nationwide basis. After this season, there will be an end to the hundreds of millions drained from taxpayer refunds by these high-cost, high-risk loans. "We will be glad to see the last of RALs, which were both high-cost and high-risk," says Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC). "It's not a moment too soon to stop multi-million dollar corporations from skimming off the tax refunds of hard-working families."

Consumer advocates suggest that taxpayers looking for quick refund cash should consider these lower-cost or free alternatives

Taxpayers with a bank account can get their tax refunds in 8 to 15 days with e-filing and direct deposit.

Taxpayers without a bank account can get a fast refund by e-filing and having their refund deposited to a prepaid card, including any existing payroll or prepaid card that the taxpayer already has.

H&R Block is even offering free refund anticipation checks (RACs) until early February if the customer uses its prepaid Block Emerald Card to receive the refund.  

With RACs, the bank opens a temporary bank account into which the IRS direct deposits the refund check. After the refund is deposited, the bank issues the consumer a check or prepaid card and closes the temporary account. A RAC allows the consumer to pay for tax preparation fees out of the refund and provides the speed of direct deposit of tax refunds for unbanked taxpayers, but generally at an additional cost.

Life after Refund Anticipation Loans (RALs)

Even after the end of RALs, tax preparers and banks will continue to offer RACs, for which the banks generally charge about $30 - $32. Tax preparers may also charge their own "add-on" fees, which can range from $25 to several hundred dollars.  Since of their main purposes is to defer payment of the tax preparation until the refund arrives, RACs may represent a high-cost loan of that fee. With the exception of free RACs, consumer advocates recommend taxpayers consider alternatives.

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A Prepaid Travel Money Card works much like an ATM card except that it can be used seamlessly to withdraw cash in foreign currency. By using Travelex promotion code , you can get a Cash Passport done. This is best suited for individuals or families travelling abroad on Christmas breaks. By paying for the card in advance, you typically lock in the exchange rate and therefore do not have worry about fluctuations in the Forex market. In the event that the rate drops too much, then you will not be affected thanks to the lock in.

Furthermore, the Cash Passport works both like a debit card as well as an ATM card abroad. In fact, you can make ATM withdrawals from most cash dispensers around the globe without paying any extra processing fee. The prepaid card can be procured in any one of the six currencies that include South African Rand, New Zealand Dollar, Australian Dollar, Euro, Canadian Dollar and US Dollar.

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