Worst Tax Product Ever: The Refund Anticipation Loan Debit Card

Refund anticipation loans are bad enough, but H&R Block and Jackson Hewitt want you to get a RAL, and then put it on a fee-riddled pre-paid debit card. What a great idea!


First of all, refund anticipation loans are bad news. Last year, despite our frequent warnings, nearly 9 million American taxpayers paid $900 million dollars in RAL expenses. The typical RAL only lasts 7-14 days according to the National Consumer Law Center, and carry APRs of up to 161%.

“For a free quick refund, file electronically and have your refund direct deposited to your own bank
account,” says Jean Ann Fox, Director of Financial Services for CFA, “You’ll generally receive an efiled,
direct deposit refund within 8 to 15 days.”

Add those costs to the fees associated with a pre-paid debit card and you’re really wasting money (our favorite is the $1.00 H&R Block charges just to check your balance. Clever!)

H&R Block suggests that you “save money” by rolling the loan over onto their “Emerald Card.” The main sales pitch for this card is that you are not required to pay H&R Block up front for the tax prep, and are instead given a magical debit card full of money! This is probably especially tempting for consumers who are otherwise “unbanked” and would have to wait longer for a paper check from the IRS. Worst tax product ever. Avoid.

Terms And Conditions (PDF) [H&R Block]
Emerald Pre-Paid Mastercard [H&R Block]
Positive improvements For Refund Anticipation Loans, But Consumers Still Warned To Avoid Them [National Consumer Law Center]


Edit Your Comment

  1. speedwell (propagandist and secular snarkist) says:

    Anyone know of any comparatively decent deals on prepaid debit cards? My guy’s little sister can’t get a credit card or checking account (having no job at the moment has something to do with this), but she wants to take advantage of super online deals for baby stuff she needs so she can save money. We can’t always meet up so I can order for her.

  2. winstonthorne says:

    @speedwell: Use a prepaid AmEx card (they’re at every customer service desk in every mall in my area; probably the same in yours). They have no fees or costs, and work anywhere AmEx normally works.

    A word of warning – when the card’s running down and you want to use the last $5 or whatever toward your groceries, make sure you know the *EXACT* amount of the card, so that when the merchant splits the bill they don’t try to take more than what’s on there, causing the whole thing to lock up.

  3. weave says:

    Prepaid Amex cards *do* have fees – up front. Like to get a $100 Amex card it costs like $108.00 (from memory).

  4. Melsky says:

    I think it’s really sad how many people use these tax services. I’m not good at math or accounting but with software it’s very easy and you can do it at the public library. In the area I live there’s a Jackson Hewitt and and H&R Block right next to each other and they are full every night with people waiting to have their taxes done. Most of them are probably people who want to get their refund right away and are paying heavily for it.

  5. jimmy37 says:

    Get real! If everyone did what was financially sound, we wouldn’t have the subprime crisis, people wouldn’t be bankrupt, our savings rate would be through the roof, retirements would be fully funded, et cetera, et cetera, et cetera.

    I wonder how many people pay someone to do their 1040EZ?

  6. NotATool says:

    @Melsky: I agree, unless you have really complicated finances, taxes aren’t that hard to do yourself and are very easy to do with tax software.

    People are so afraid of screwing it up, they’d rather pay someone else to do it. I worked with a guy like that, terrified of messing up and having the IRS come after him.

  7. RandomHookup says:

    Add the cost of the loan to the problem of many people using the IRS as a savings plan and you have a double hit.

  8. kerry says:

    When I saw the ad for Jackson Hewitt’s card the other day I immediately thought of you guys. Glad you’re covering the story. Your last statement, that this would be most appealing to “unbanked” customers, as the RAL is in the first place, seems pretty accurate. I hate to think that a bunch of guys at JH and H&RB are paid to figure out how to screw those with the least to lose.
    I have a friend whose sisters are suckers for this sort of thing, so she’s trying to convince all of them to let her do their taxes with TurboTax and then give them their refund on the spot, out of her own pocket, and collect the refund check later. Just so they won’t fall for the RAL trap again.

  9. stinerman says:

    Too many.

    I recall doing my taxes when I was 16. It took about 5 minutes:

    “How much did you earn?”
    “Standard deduction; no credits”
    “Yep, we owe you!”

  10. polyeaster says:

    Paying someone else to do my taxes is against my religion.

  11. Paul D says:

    A good friend of mine works at his mother’s H&R Block during tax season.

    A couple of years ago, my buddy’s mom/boss decided the whole RAL thing was bad news. She just couldn’t in good conscience continue to provide them, despite the push from H&R corporate. She apparently had the power to drop the service because, as I understand it, most H&R Block storefronts are not corporate-owned. They are franchises (can anyone confirm?).

    Anyway, long-story-short, the customers revolted! They were absolutely aghast.

    “Waddya mean I can’t get my refund now!?! I don’t care how much it costs! I want that money yesterday! Cigarettes and lottery scratch-off tickets don’t grow in trees!”

    Etc. Etc.

    She basically had to reinstate the service due to high demand. But she has instructed her tax preparers to start the pitch at the lowest/cheapest tier of the service and work their way up, based on what the customer wants. I believe this is the opposite of what the corporate office wants them to do.

    Full disclosure: I have my taxes prepared at H&R Block every year, and I NEVER go for the RAL. My direct deposit refund usually takes 2 weeks.

  12. ekthesy says:


    A few years ago I bit the bullet and had H&R do my taxes since I had worked in three different states, and the whole thing got really complicated. I was shocked at the total charge of something like $270 for using a freakin’ computer program…I had to sit there for three hours while a retired CPA pecked around on a keyboard. About the only thing he did that I wouldn’t have figured to do myself was to deduct my many moving expenses, that was pretty nice. But in the end, I think I broke even after paying the Blockheads.

    From then on, it’s been 1040A FTW, and I cannot believe how easy it is. Although I haven’t gotten my W-2 yet and am anxiously waiting for Feb. 1 when I can hopefully report my company to the IRS :)

  13. manok says:

    there’s a tax store in town that opened up overnight. Out front they have two yokels dressed as the statue of liberty holding signs that say “do your taxes today”
    Yesterday they had free hotdogs. The guy was grilling them 5 feet away from speeding traffic.

  14. Xerloq says:

    I’ve never done the RAL, but I did receive my tax refund via this debit card once to get my rather complicated tax preparation for ‘free’ one year. Worst thing I’ve done, tax-wise.

    It took 8 weeks to get the card which had an exhaustive schedule of fees – nearly everything was $1 per transaction – checking balance, using as a credit card, debit and signature, etc. The only thing that was ‘free’ was using the card and pin at POS. So I took the card to Walmart, spent $0.50 (I took two quarters) and bought some money orders to empty the card. I guess my complicated tax prep cost me only $0.50 – and 8 weeks of my life.

  15. BeFrugalNotCheap says:

    Um, if you file online you get a direct deposit withing at *least* five days. Now people have this so called “urge” to get their OWN MONEY BACK. I would gladly contribute to the consumerist if they ran a national TV spot outlining the evils of the tax anticipation loan. what a scam. has anyone noticed now that every MONTH theres some new “Holiday” that must call for commericals and barrages of ads trying to separate you from your money? dec=xmas, jan=after xmas sales, feb=tax refund loans, superbowl, valentines day, march= easter, etc etc. When do we get a break?

  16. justaconsumer says:

    It is clear the H&R Block has become the latest scam artist. Buy Turbo-Tax. Do it yourself. It ain’t that hard and you’ll save a bunch.

  17. thefezman says:

    Here’s the fee schedule (I removed the no-fee items):

    7. Fee Schedule
    • Domestic ATM: Cash Withdrawal Fee: $1.85
    (ea./each/per occurrence, etc.)
    • Domestic ATM: Balance Inquiry Fee: $1.00
    (ea./each/per occurrence, etc.)
    • International ATM: Cash Withdrawal Fee: $2.50
    (ea./each/per occurrence, etc.)
    • International ATM: Balance Inquiry Fee: $1.50
    (ea./each/per occurrence, etc.)
    • ATM Denial $0.50
    (ea./each/per occurrence, etc.)
    • Customer Service Live Agent Fee: $2.00
    (per call, first 2 live agent calls per year are FREE)
    • Over the Counter Withdrawal $20.00
    for Personalized Cards:
    (ea./each/per transaction, etc.)
    • Additional Card Fee: $10.00
    (maximum 1)
    • Replacement Card Fee: $10.00
    (each; when Card is lost, stolen, or replaced)
    • Express Delivery Fee for replacement card: $35.00
    (each; delivery fee only)
    • Check Request Fee: $20.00
    (charged if a check is issued for funds in
    your Card Account)
    • Paper Statement Fee: $1.00
    • Duplicate Paper Statement Fee: $2.50
    (per statement requested)
    • If you use an ATM not owned by us for any transaction, including a balance inquiry, you may be charged a fee by the ATM operator even if you do not complete a withdrawal.

  18. the_wiggle says:

    stories like this make me happier with my accountant. we get in/out/filed no later than 02/15 each year.

    disclaimer: yes, my taxes are complicated. . . sigh.

  19. Melsky says:

    I just walked down the street by my house where the Jackson Hewitt and H and R Block are and another income tax place with a big banner advertising their Refund Anticipation Loan just opened up across the street. Amazing.

  20. furseekr says:

    @SPEEDWELL: Getting a checking account has nothing to do with having a job. If your guy’s little sister can’t get a checking account she probably has a record with ChexSystems. If she’s done something bad to a bank in the last 5 years she probably does.

    Before anyone buys tax preparation software they should check out [www.irs.gov] Many people are eligible for free online tax preparation and free e-filing. There are income and state restrictions, but both TurboTax and H and R Block (among many others) offer service.

  21. Charred says:

    Can you say, “Idiot tax?”

    I knew you could!

  22. tellme says:

    Last year I filed at H&R Block. It cost me about $300. in fees etc.
    This year I went to the IRS website and clicked-through the FREE-FILE! (if you made <54,000), and then I was given a choice of which tax-preparer I wanted to choose. I chose H&R Block.
    I was given a further choice to look at “premium services”, and one of them said that for an additional $19.95, they would transfer ALL of my personal info. from last year’s returns, plus move this year’s info to my state return. (YaY!). This was available to me since I had previously filed with them.
    (hint-the IRS site has many tax-prepares listed, look for one you used before).
    There were 2 items from my last year’s tax packet that I needed.
    My gross income. And my Federal electronic signature pin#. (I didn’t even know I had one, but it was there)
    I did this last Friday and the money is set to go into my bank on Thursday at midnight.
    I made one bad mistake and erased all of my data, but the screen warned me that I was doing that.
    I called and they told me how to fix it.

  23. Suffer says:

    I’ve been using taxslayer.com for years. Fast and easy, and if you happen to be military, it’s free.

  24. youwantedahero says:

    @weave: it is not. it’s 2.95 per card, NOT eight dollars. come on.