It’s that time again – time for much needed spring cleaning and, for thousands of Hoosiers, un-needed cleaning of another sort – cleaning people’s pockets out of hard-earned money through “rapid refund” tax preparation.
According to Momentive Consumer Credit Counseling Service, the oldest and largest of the not-for-profit credit counseling services, “people don’t realize how much of their own money they will lose when using a rapid refund tax preparation service”.
In a recent bulletin, Momentive explains that since the preparation fee (average cost $150) is taken out of your tax refund before you even see it, it feels as if you’re not paying for the service. Even worse, a rapid refund tax preparation service may give you your refund in the form of a card that looks like a debit card. Each time you use one of these to withdraw money from an ATM, you could be charged up to $2.50 for the transaction. Then, if you ask for the balance on your card, you can be charged another $1.50. Talking to a customer service agent can cost $2.50.
In order to understand what’s happening here, you must realize that a rapid tax refund is a loan. That’s right, your refund is a l-o-a-n from the company until such time as the real refund comes in. The bottom line is, you’re paying to receive your own money just a few days sooner than you would have gotten it anyway! At the moment, getting your money early might sound like a good thing, but this is a case in which the best things in life aren’t free.!
The website Bargaineering.com offers an example of a $2000 tax refund anticipation loan from H&R Block. The $29.95 activation fee amounts to a 36% APR, plus another $20 check-processing fee, bringing the annualized interest cost on $2000 to more than 40%!
Rapid refund anticipation loans are just another form of payday lending. And don’t get me started on that!