The other day Charles Prescott, a tax preparer at the Roni Deutch Tax Center in Myrtle Beach, was interviewed by Carolina Live on the difference between refund anticipation loans and refund transfers, which are much better for consumers. Check out the article with the quote from Prescott below.
In this economy, some look for quick and easy cash advances on your tax filings, but consumer advocates say beware.
One of the ways to get in the most trouble is through something called a Refund Anticipation Loan -- or an RAL.
RALs are short-term loans based on the taxpayers expected refund, but it comes with a cost, and in some cases that means astronomical interest rates.
Some major tax preparers offer RALS, but at the Roni Deutch Tax Center in Myrtle Beach, the preparers say stay away.
"As a financial product, they're creating a loan that has absolutely no risk that charges an obscene interest rate. You should avoid these whenever possible," said Charles Prescott, a tax preparer.
But many Americans don't especially the working poor who are enticed by the quick and easy cash and who may not think about the fine print.
"While there are disclosures there, most people just don't read them. Kind of like the 30 pages or mortgage paperwork that no one read a few years ago."
For tax preparers and financial institutions who deal in RALs, they're a high-profit, low-risk loan. For consumers, the fees and interest rates add up quickly.