Wallingford, CT - February 11, 2010 – 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 www.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. BBB offers objective advice and a wide range of education on topics affecting marketplace trust. BBB also offers complaint and dispute resolution support for consumers and businesses. Today, 128 BBBs serve communities across the U.S. and Canada, evaluating and monitoring more than three million local and national businesses and charities. For more advice on finding companies and businesses, start your search with trust at www.bbb.org.Howard Schwartz, Communications Director, 203-269-2700, hschwartz@ct.bbb.org