Financial Focus:Tax Season 2021 — What is a $4000 Tax Refund Advance?
By Professor Anthony Rivieccio MBA PFA
We should say right at the top: Full Disclosure, yes, we are one of the firms in New York State that rallied NY Government to take a look at the fraudulent program many tax companies started at that time: It was called, Rapid Refund!
With our pressure ( and others) we forced the Govt to ” re-write ” the real name of the program ” Rapid Loan”, and New York State agreed 20 years later, you do not see Rapid Refund programs, you now see Rapid Anticipation Loans(RAL). What are they? Rapid Loans! The difference today: now the consumer knows what it really is—- but sadly many still sign on, but that number has been lowering in recent years, so now tax companies have a new ” gimmick” for you : The Refund Advance (RA).
The Refund Advance is, generally, a no-interest loan that is repaid with your tax refund. It’s available from many tax outlets and available in five loan amounts ( $250, $500, $750, $1,250, $3,500). The Refund Advance is a loan; it is not your tax refund.
Tax refund advance loans are short-term loans of $200 to $4,000 you take out when you’re already anticipating a refund from the IRS. The loan amount is deducted from your refund once it’s issued. In some cases, you can get the money loaded onto a prepaid card within 24 hours.
Now this is where it really gets interesting. If the loan is free , how does the company make money (RA)? Well, as you are hopefully learning now, there are different kind of loans. Some are ” no interest” , which means there are ” fees” on the card . Or some just charge, interest, on the loan (RAL). How?
With RA’s, A bank works with the tax company that lends you the money, which is usually loaded onto a new prepaid card. When you receive your tax refund, the advance amount is automatically deducted from your refund and funneled to that bank, effectively paying back your loan for you.
Some (RAL) programs, are really ( the banks would say) a convenient way for you to access money you can have at a loan rate of 35.9% , that you could get with just a pay stub or other proof of income. So, unlike other Refund Advance loans, this is a way to access money before your W-2 is available.
So yes you have your 36% RAL loan, which you can get before tax preparation or an Early Refund Advance ( RA) during Tax Preparation where is is no interest rate fees– but bank & company card fees for access.
Yes, it gets confusing! A refund is an advance which is a loan which is a refund which is an advance
20 years later, Tax Companies are making it very confusing.
A tax refund loan is a short-term loan you can take out through a tax preparer when you’re anticipating a refund. It allows you to access your refund early, and the loan is deducted from your refund once it’s issued. A tax advance is technically, not a loan— but in essence , a 3rd party transfer of a banks money for you to access- with their ATM card which has tremendous fees.
Some tax companies are now using both programs to put on their own internal ATM card- for more bang- so they can take your buck!
We looked at one BIG Tax Companies policy of ATM card fees
Cash reload $4.95 Fees of up to $4.95 may apply when reloading your Card Account at authorized retail reload providers. These fees may vary based on location and are assessed by the reload provider and may be subject to change without notice.
Check to Card –Expedited Funding(Funds inMinutes)4% Fees of up to 4% of the check amount, based on accepted check type. This fee is reduced to 2% for pre-printed payroll and government checks with printed signature. Minimum fee of $2.
Bill payment (electronic or check) $0.95 Bill pay available when you log in. Regular electronic bill pay transactions will be completed within approximately 2 business days. If we have to mail a paper check, we will process the bill pay transaction within approximately 2 business days, plus additional time for mailing.
Expedited delivery for bill payment (electronic) $2.00 Expedited electronic bill pay transactions will be completed within approximately 1 business day. $2 delivery fee is additional to $0.95 bill payment fee.
Expedited delivery for bill payment (check) $15.00 Expedited bill pay transactions will be completed within approximately 2 business days if we have to mail a paper check to pay your bill. $15 delivery fee is additional to $0.95 billpayment fee.
ATM withdrawal $3.00 This is our fee. You may also be charged an additional fee by the ATM operator, even if you do not complete a transaction.
Over the counter withdrawal $35.00
ATM balance inquiry $1.50 This is our fee. You may also be charged an additional fee by the ATM operator.
ATM decline $1.50 You may also be charged an additional fee by the ATM operator.
Inactivity $4.95 You will be charged $4.95 each month after you have not completed a transaction using your Card for 60 days. Fees do not count as a transaction.
Replacement Card(expedited delivery) $35.00
So which one is better if your expecting let’s say, a $5,000 tax refund?
You can take out a RAL, at 35%, that would be a $1,750 fee, please; or you can take a RA, for a no loan fee, but bank company charges above will apply. So if you had for example 50 ATM transactions of $100 each ($5,000) your ATM should be $150 , assuming the other things above don’t apply, which probably means, your total fees could $200 or more.
Is $200 cheaper than the $1,750?. Of course!
You’re talking 4% charge instead of 35% to have your money— in advance; but if you just followed IRS guidelines, wait 3 weeks and request efile/direct deposit into your bank account- the IRS will tell you that’s FREE. Hmmm, 3% or 35% Now, or FREE in 3 weeks.
Sadly, the people it effects the most– people of color !
Professor Anthony Rivieccio, MBA PFA, is the founder of The Financial Advisors Group, celebrating its 25th year as a full service investment planning & management firm . Anthony is also owner of Rivieccio Financial Advisors, a virtual only financial planning & advisory firm, opened in 2021. Mr. Rivieccio, a recognized financial expert since 1986, has been featured by many national and local media including: Kiplinger’s Personal Finance, The New York Post, News 12 The Bronx, Bloomberg News Radio, BronxNet Television, the Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Co-Op City News, The New York Parrot, The Bronx News, thisisthebronX.info , The Bronx Chronicle & The Parkchester Times. Mr. Rivieccio also pens a financial article called “Money Talk”. Anthony is also currently an Adjunct Professor of Business, Finance & Accounting for both, City University of New York & Monroe College, a Private University. To learn about our new Personal Finance internet streaming platform, FinancialFocus+, filled with ; Broadcast TV, with financial financial news & analysis, Educational Classes & Courses & ” how to” Webinars, just call or email for a brochure. For financial assistance, Anthony can be reached at (347) 575-5045. Have Facebook? My email is a_rivieccio@yahoo.com My personal page is www.facebook.com/anthonyfromthebronx
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