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It's a nice double penalty for those who think the best way to have a savings account is to let Uncle Sam hold onto it.
It's a nice double penalty for those who think the best way to have a savings account is to let Uncle Sam hold onto it.
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\"Chi Chi Wu\" = Best. Name. Ever.
I agree that RAL's are generally not a good product. However, it must be said that many of the \"taxpayers\" that select a RAL product have the majority portion of their tax \"refund\" comprised of Earned Income Credit. Earned Income Credit is not tax dollars that these \"taxpayers\" contributed through paycheck withholdings, rather, it is a credit to them from the feds based upon their yearly wages/compensation they have earned. Therefore, banks that do RALS oftentimes do not take \"hard earned\" money from the individual selecting the RAL's pocket, but the charges and fees are paid for from the Earned Income Credit amounts. These banking institutions are really sucking money from a federal government program intended to reward lower-income people for working not from the lower-income people themselves. And, of course, it is the rest of America's taxpayers who do not qualify for the EIC that are funding the credits paid through their tax contributions. So, essentially, these banking/lending institutions have found a way to get their hands in a pot o' federal money that is distibuted to those that might have less-than-sound financial judgment capabilities and that may also be in financial straits.
As Random Hokey states, why are people loaning the Gov't money to use and then having to loan it back to themselves? If you are getting a big refund, your W2 deductions needs to be reviewed. No one seems to get the fact that it is really better to owe money and pay it back in April or later (with extensions). You get full use of your money and then pay what you really owe on the back end months later.
It's worth the hundred bucks or so of lost interest on a $1500 refund to not have to come up with a tax payment in the months after xmas. And extensions, like rebates and constantly calling the cable or phone company to try to get free service by threatening to switch, are for people whose time is worth nothing.
Some people do their household budget down to the penny, while some of us like to be able to say, \"Sure, doe-eyed niece, I'll get you that High School Musical DVD\" without bringing up a spreadsheet first because we can be pretty sure we'll cover the debt in a couple months. You may call it dumb, but I call it human.
Also, if you want your money quickly, just FILE EARLY. As soon as you get your W2s and 1099s, fire up turbotax or whatever is your preference and just do your taxes and be done with it ASAP. Now you get the refund much earlier, both because you did your taxes earlier and your refund gets processed before the huge mass of last-minute filers.