Tax Tip: Do Not Put A Refund Anticipation Loan On A Prepaid Credit Card

As we’ve mentioned before, refund anticipation loans are a bad idea. They’re made doubly bad when they are deposited to a prepaid credit card, but that’s just what HR Block suggests that you do. Why is this a bad idea?

•Refund Anticipation Loans can saddle you with unmanageable debt and unreasonable fees.

•Prepaid Credit Cards are notorious for having things like monthly maintenance fees, inactivity fees, reload fees and expiration dates.

•eFiling with direct deposit can take as little as 10 days.

So don’t be a sucker. Do your taxes and wait for your refund. —MEGHANN MARCO

Emerald Pre-Paid Card [HR Block]

RELATED: Avoid Tax Refund Anticipation Loans
Don’t Get A Refund Anticipation Loan

Comments

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  1. nweaver says:

    And do your taxes EARLY. The best way to get the refund earlier is to send them in earlier. As soon as I get my 1099s the taxes are getting done and in the mail.

  2. Magister says:

    Yup, I tend to get my refund by mid-Feb. The same people that get refund anticipation loans tend to be the same people going to payday loan places.

  3. Antediluvian says:

    Prepaid credit cards are only really good for buying more stuff. If you’re in a financial situation where you’re in NEED of a “refund anticipation loan”, you probably should be SAVING your refund or using it to pay off existing credit card debt, not acquiring more stuff. (Yes, I know credit cards can now be used to pay utility and other bills — a terrible idea, I think.) This is not intended to be a moral judgement on the “loan”-seekers but rather on the unscrupulous practices of some corporations, for all the reasons regularly mentioned on this web site.

  4. Also, YOU SHOULD NOT BE GETTING A LARGE REFUND.

    Adjust your withholding. You wouldn’t use a 0% savings account at your local bank, and you shouldn’t use one with Uncle Sam. Find out how many exemptions you’re claiming and use the IRS’s Witholding Calculator.

    Don’t be afraid to owe on your taxes either. You don’t have to pay interest or penalties unless your estimates are more than 1000 dollars off. And be sure to reevaluate every time there’s a major life change (marriage, child born/moves out, buying a house, going to school).

  5. Ass_Cobra says:

    “Also, YOU SHOULD NOT BE GETTING A LARGE REFUND.”

    Good advice, all the excess you are having witheld is basically being put in a 0% savings account. Unless you have a lot of irregular income or uncertain income you should be able to estimate your taxes fairly easily. Definitely get the witheld per pay period as close to your estimate as possible.

    I unfortunately have been forced to give the government a 0% loan. If you switch jobs the odometer on your social security contributions goes to zero (because each employer is required to contribute up to the ceiling) and you end up contributing individually past the ceiling amount. You get it back as a credit when you file, but it still sucks not having that cash during the year.

  6. adamondi says:

    I have been eFiling with Direct Deposit for several years now. It has never taken more than 12 days, and often takes between 9 and 11 days to get my refund dumped straight into my account. I make sure to do my taxes as soon as all the paperwork arrives. It’s the best way to go about it. I never dread tax time.

  7. Anonymously says:

    Some people use the refund as a “pay yourself first” mechanism because they lack the willpower to save otherwise. In those cases, 0% interest is better than spending an extra $20 a week on frivolous expenses.

  8. ValEl says:

    Wow, I KNOW I’m listening to the voice of reason now. I can’t STAND these companies seizing tax time like it’s friggin’ Christmas Part 2. Is’nt tax season supposed to be business like? I mean, jesus, they hold on to YOUR taxes (uncle sam) interest free for a whole year THEN GIVE IT BACK TO YOU. And people act like it’s mana falling from the heavens or something. It’s YOUR money and if you pay some company EXTRA money to get your OWN money back then you have issues. And before you start in on me about how “oh I NEED my money now!”…chill out. Just file your taxes and get direct deposit. It takes about five days for it to arrive. Trust me, the flat panel plasma Telly can wait.
    Can’t we have at least a month without some “holiday” being shoved in our faces? And don’t EVEN get me started on valentine’s day *&^%$#@!