The Hidden Costs Of Rapid Refunds
What’s the hubbub with rapid refunds? That’s all you hear about around tax time. While you do get the tax refund you are owed in record time, these rapid refunds may not be all that they are cracked up to be. Read below to find out all about rapid refunds and the ins and outs of the process.
Based off of what commercials, rapid refunds are a great way to get your tax refund in cash ultra-fast in exchange for a meager fee. Although getting money that quickly feels nice, how necessary is it?
Depending on the circumstances, some families live from paycheck to paycheck. At tax time, the big bolus of cash is a welcome sight when there are bills to pay and mouths to feed. Well known tax centers like Jackson-Hewitt or H&R Block can file your tax forms and sign you up for the rapid refund program.
Although it seems so easy on the surface, rapid refunds are more complicated than that. In reality, they are refund anticipation loans, abbreviated RAL’s. Just all loans, they bring with them interest and finance charges.
Rapid refund sounds a lot nicer than refund anticipation loan, since few people are really interested in being tied to a loan. Rapid refunds, thus, are often a source of confusion, since they are rarely equated with what they actually are, loans.
The reason for the name change is that people felt defrauded by the advertising. If they had known it was a loan, they would not have taken advantage of the offer. At the onset, the interest rate charged for one of these loans was staggering. To make matters worse, the people who seemed to be targeted were low income earners receiving the earned income tax credit (EITC).
A family who really needed their tax refund right away was able to get it as a result of the rapid refund program. But, if the person applying for the rapid refund was not aware of the high charges they would be charged on the loan, and even if they paid as soon as possible, the extra they had to pay because of interest on their refund of a few thousand dollars was astronomical.
Something that not many people understood at that time is that electronic tax filing gets you your refund in just a couple of short weeks, which is still pretty fast. A tax preparer can complete the necessary forms on the IRS’s website in your behalf, even if you don’t have your own computer.
If you don’t have a bank account, electronic filing is still possible, you will just receive a check by mail instead. In order to get your money even faster through direct deposit, you can open an account at a credit union associated with your church or workplace. These accounts tend to be easy to open and require extremely low minimum balances, sometimes just twenty-five dollars.
To avoid charges associated with refund anticipation loans, review all your options when it comes to getting your tax refund fast.
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