Refund Loans Pile On Fees
— -- Walk in with your W-2 form, and walk out with your refund. Sounds great, but it's not cheap!
It's an early Christmas for many Americans, most low-income with small children. As soon as their W-2 comes in the mail, they head right to the tax preparation office. Often, they can walk out with a check for $1,000 or more — money they desperately need.
"[It's] good business, but not for the person that's receiving them. They are loans. They're not just giving you your money. They're charging you for it," said Don Roberts of the Internal Revenue Service.
They are called refund anticipation loans, and according to Roberts, they aren't cheap. Assume a person is due a refund of $1,200. He goes to a company that offers a refund anticipation loan, pays a $30 fee, plus a $45 finance charge on top of another fee starting at about $50 for doing his taxes. The money adds up.
But how much sooner does he get the refund?
"Maybe two weeks faster than if you simply filed the return and had direct deposit," said Roberts. "Or if you don't have a banking account, maybe three weeks faster than getting the check sent to you."
For $125 or more in fees, it's cheaper to wait for the check.
Click here for interactive tax explainers and calculators
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