Tax-refund loan products are relatively new. Consumers must dig into the details to understand what kind of loan they might expect and exactly what’s being offered.
People who are looking for fast cash to pay holiday bills, unexpected car repairs or skyrocketing heating bills are being bombarded with TV ads, window signs and other pitches for tax-refund advances.
The pitch is tempting, especially when the ads say up to $3,000 could be available in an advance.
The refund loan products are relatively new. Consumers must dig into the details to understand what kind of loan they might expect and exactly what’s being offered.
The advance loans are made by banks — and secured by and repaid directly from a consumer’s tax refund. As a result, the size of the loans will be limited.
Through Feb. 28, a 0 percent interest loan for up to $3,000 is being offered to current and new customers at H&R Block. If approved, H&R Block says, clients will typically have access to money the same day they apply.
Jackson Hewitt has a product that promises up to $3,200 — up from a maximum of $1,300 last year — for a 0 percent interest loan.
Liberty Tax is promoting what it calls “the largest tax-refund advance offer in the industry” with its Easy Advance Loan of up to $3,250 through Feb. 28. No fees or interest are associated with the loan.
If you are interested in a refund advance, here are some points to consider:
• Everyone isn’t getting a 0 percent loan of $3,000 or so.
Liberty Tax, for example, notes that to be eligible for the maximum $3,250 loan amount, you’d need an expected federal income-tax refund — minus authorized fees for tax-preparation services — that amounts to at least $5,095.
The available loan amounts at Liberty Tax are $500, $800, $1,300 and $3,250.
The actual loan amount will vary based on the expected refund amount, ID verification, eligibility criteria and underwriting.
The refund advance loans at H&R Block are in four different amounts — $500, $750, $1,250 or $3,000 — depending on what you’re qualified to receive.
H&R Block said a client needs to be due a federal income-tax refund of at least $1,000 to be eligible for a Refund Advance and meet underwriting criteria.
Jackson Hewitt customers can get loans available in amounts of $100, $200, $500, $750, $1,000 or $3,200.
The advance loan is offered to Jackson Hewitt clients by MetaBank in South Dakota. A MetaBank spokesperson said the bank works to provide the highest loan amount possible, and in many cases that’s more than 50 percent of the refund due.
• You cannot go online to get one of these advances.
You’re going to need to visit a tax professional and have your taxes prepared at a participating H&R Block, Jackson Hewitt or Liberty office to obtain any of these loans.
• No fee does not equal no cost.
Most of these promotions for refund advances highlight that there are no finance charges and no loan fees.
But this is key: Any tax-preparation fees would apply.
So you want to try to understand what you might pay to get your taxes prepared at a given location.
H&R Block notes that you can file a federal 1040 EZ free through Feb. 28.
But many people cannot file the EZ form. For example, you cannot file an EZ if you claim dependents. And you cannot file the EZ form if you claim any credits other than the earned income credit.
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And H&R Block notes that additional fees apply for the Earned Income Credit and certain other additional forms, for state and local returns, and if you select other products and services.
Don’t forget there are now plenty of ways for many people to file tax returns without paying a charge. Free File tax software, for example, will be available at www.irs.gov for many households with incomes less than $66,000. And some lower- and moderate-income consumers might qualify for free tax services via volunteer sites.
Chi Chi Wu, staff attorney at the National Consumer Law Center, said some mystery shopping tests have shown that tax-preparation fees can be $400 to $500 for some lower or moderate income taxpayers who qualify for the Earned Income Tax Credit.
The tax-preparation fees typically are taken out of your refund when you take out a refund advance loan.
• Is this really a way to get same-day cash?
Jackson Hewitt says the refund advance money is available minutes to 24 hours after completing a tax return with Jackson Hewitt if the money is loaded on the American Express Serve prepaid card. But you do have to watch for any fees associated with using a prepaid card.
If you choose direct deposit into your bank, the money could be available within three days.
The loan is automatically repaid once the tax refund is received.
• Do you need to rush?
If you’re looking at a smaller advance, say $500 or $800, could you come up with that money on your own to pay some bills? Remember that these 0 percent loans offer you money only a few weeks before your tax refund would be issued anyway.