Can You Afford an Early Refund?

You've seen the ads: Get your tax rebate earlier rather than later and you only have to wait a day.

But can you afford to get your refund early?

Refund anticipation loans, RALs, allow eligible customers to receive part or all of their tax refund in as little as a day.  But it comes at a cost.

"If you get a refund anticipation loan, you are borrowing money from a bank," said Chi Chi wu, with the National Consumer Law Center. "You are basically borrowing your own money."

In 2007, about 9 MILLION taxpayers took out an RAL and paid about $900 million in fees.  Fees vary, but a $2,600 RAL can cost about $135 in fees.  An electronic direct deposit would only take about eight to ten days.

When the interest is annualized, taxpayers end up spending 50 to 500 percent interest on refund anticipation loans.

H&R Block and Jackson Hewitt are popular RAL providers.

"At 2 percent of the refund, RALs cost less than a bank overdraft, a credit card advance or, in some cases, using an ATM," H&R Block said in a statement.

"(Some consumers) may have a need for quick access to funds," said Jackson Hewitt. "To meet a timely expense, a RAL may be a viable financial option".

Most RAL customers, 84 PERCENT, HAd an income of LESS THAN $40,000.

"These are families that work hard and generally have kids," Wu said. "They need every penny of the refund they are getting back from the government."

If you choose RAL, Wu said, shop around for the lowest fee.  If you're willing to wait a few days, you may be able to get your tax refund for free.

Those who made less than $56,000 last year can file a federal tax return for free online at www.irs.gov.

It's your refund.  You can get it fast, or you can get it all.