On this Martin Luther King Day, let’s talk about a sore subject: Refund Anticipation Loans and Refund Anricipation Checks. Large Tax Preparation services have been offering RALs for years. After efiling your return they offer to loan you your refund for the 2 weeks it takes for direct deposit to put the money in your checking account. What a ripoff! They reduce the amount they give you by interest fees and their tax preparation fee (I am sure there are RAL setup fees also) then when the refund comes, they keep the total amount. The IRS finally had enough and told all the large banks not to fund these loans anymore. Now the big Services have a Refund Anticipation Check which isn’t a loan; they charge you to set up a checking account for your refund; after the account gives notice they have your refund, they give you a check for the refund less account set up and the tax prep fee. Cheaper than an RAL, but you don’t get the refund much sooner – another ripoff. Here is a link to an article spelling it out in detail:
The amount you pay for these things is way too expensive; the article says people without checking accounts use them a lot. They would be better off setting up an account before efiling their returns. The bank won’t charge to do this, and they don’t have to pay to get their own money back from the government. This article also talks about a new debit card offered by the Treasury Department which looks like a low cost alternative to RALs and RACs. I have never offered RALs and RACs and don’t plan to.