Friday, May 16, 2008

Another reason not to RAL-ly (*Updated*)

Has your stimulus check arrived yet? Still waiting on that $600 (or $1200 or $300) to arrive so you can go stimulate the economy?

Well, it turns out that if you got a Refund Anticpation Loan (RAL), you may have to wait a little longer.

USA Today says "taxpayers whose fees were deducted or who took out refund-anticipation loans are receiving paper checks because those loans involve a third-party bank account." (see the full article here)

Now I personally believe these RALs are a RIP-off. They allow you to file your taxes and then get your money in about a day or two. For fees of $200 or more. I know people who got their refund check in under two weeks. So let's say your refund is $400, you take a RAL (or "rapid refund") and walk out with $200. You've effectively borrowed that $200 for two weeks. I don't even want to think about the interest rate involved.

But now, to make matters worse, your stimulus check is being delayed because of that. Where's the good in this?

(Preview announcement: By special request, I intend to blog on Cash Advance stores next week. Watch this space!!)

*** Update
One of my faithful readers found out (the hard way) that their stimulus check was delayed, not due to a RAL, due to paying Turbo-Tax with the refund. When you file online, you can file free when your income is below a certain level. Above $54,000 in income and you'll have to pay. So, let's say you use TurboTax (I think other tax preparers do the same thing) and find out you'll get a nice refund. You can allow TurboTax to take their fee out of the refund.

However, since TurboTax is an intermediary in the tax process, your stimulus check will be on paper, instead of direct deposit.


Anonymous said...

This whole "refund" thing is a waste of time and money. And the loans just make it worse.

Looking forward to your cash advance post!

Randy said...

I assume that you're talking about the "stimulus" refund? As opposed to a "regular" refund that is.

Yes, I agree the "stimulus" chek is a waste. Back in January (when everyone was calling it a rebate) I commented on that. It's far from a rebate, and I personally don't think it will stimulate much. And all we're doing is borrowing on future promises.

As for a regular refund, (where you pay more taxes during the year and get in back circa 4/15), they too are a waste. You could have used that money all year. I know too many people who scrape all year and pay interest on credit cards, only to splurge at rebate time.

Better planning is important.