Income Tax Refund Anticipation Loans

Feb. 11, 2010 - PRLog -- As income tax time approaches, Connecticut Better Business Bureau urges consumers to get all of the facts before opting for a Refund Anticipation Loan (RAL).

Many Americans would like to get hold of income tax refunds as quickly as possible to pay off debts and ease the sting of pay cuts and job loss.  One way of achieving that goal involves RALs.

Connecticut Better Business Bureau President, Paulette Scarpetti, cautions consumers to consider the complete costs of a RAL and how theses loans can wipe out a significant portion of a tax refund.

“RALs are short-term loans with exorbitantly high interest rates and hidden administration fees, so consumers are actually paying someone else to have access to their own money.  However, if the refund is less than anticipated or the RAL is not paid off in time, the fees can take a significant chunk out of the refund.”

A RAL is similar to a payday loan, with interest rates averaging between 50 and 500 percent.  They sometimes are offered by fly-by-night tax preparers.  Consumers still can obtain income tax refunds, free of charge if they are willing to wait two weeks.

Connecticut Better Business Bureau explains how to shorten the waiting period and offers the following advice and alternatives to RAL:

E-File and Direct Deposit
The fastest and most secure way for consumers to receive a tax refund directly is to file tax returns online and allow direct deposit of  the refund to their bank account.  This can take as few as eight to 15 days.  

Ninety (90) million people used e-file in 2008. The growing popularity of electronic tax filing and payment offers a number of benefits, including faster refunds, greater accuracy, secure and confidential submission and “file now, pay later, quick confirmation.”

Don’t fall for a tax refund debit card: Some suspect tax preparers offer clients their refunds on debit cards, which are another way for the company or individual preparer to make money off of an anticipated refund.  These debit cards include hidden fees – as high as $20 per transaction, and may limit how much money consumers may access at a given time. This means consumers may end up having to pay the high transaction fees over and over again each time the card is used.

Shop around: If it is absolutely necessary to obtain income tax refund money immediately, BBB encourages consumers to shop around for a good deal.  Fees and rates for RALs vary by tax preparer.  Consider alternatives to a RAL for urgent high-priced purchases, such as store credit promotions and offers which may have lower rates.
Research the tax preparer: Consumers may check out tax preparers’ performance through online BBB Reliability Reports at http://www.bbb.org. Knowing a business’ history is important because many take advantage of uninformed consumers with additional hidden fees.

Connecticut Better Business Bureau encourages consumers to select from BBB Accredited Businesses, all of which are committed to Better Business Bureau’s Standards for Trust with regards to honest advertising, marketplace behavior and commitment to dispute resolution.

Consumers can find additional information on responsible handling of finances at bbb.org.

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Founded in 1928, Connecticut BBB is an unbiased non-profit organization that sets and upholds high standards for fair and honest business behavior. For more advice on finding companies and businesses, start your search with trust at www.bbb.org.