Cash advances rarely save consumers money, no matter in what form they are taken. Payday loans, which provide consumers with cash to tide them over until their regular paychecks arrive, often come with high interest rates and origination fees. When consumers take cash advances from their credit cards, they are almost always socked with sky-high interest rates. But what about cash advances from your income taxes? When consumers request quick income tax refunds from tax-preparation firms or other companies, how much extra do they have to pay? Turns out, it can be quite a bit. The fees associated with instant income tax refunds are so high, that both the Indiana and Illinois attorney general offices in a story printed on the Web site of television station WFIE advised consumers to wait for their tax refund to be mailed to them by the IRS. Those consumers who are patient enough to do this will then receive their full refund without losing any money to cash advance fees.
The Lure of Quick Cash
Some people rely on their income tax refunds to purchase new furniture for their living rooms, the latest high-priced video game system or a cruise to Alaska. Others need their refund money to help pay off their credit-card debt or their other bills. Many of these consumers want their refund money as soon as they file their taxes. There are plenty of businesses out there willing to give them a check for this money, minus, of course, some hefty fees.
The story by WFIE quoted the owner of an Indiana tax-preparation service as saying that he charges customers who want their refund the next day $147 plus 1 percent of whatever amount they want back. This makes instant income-tax refunds just as expensive as other cash advances.
You Pay for Speed
The truth is, consumers will always pay more if they need money quickly. It’s always best to avoid cash advances, whether they come in the form of a payday loan or an instant income-tax refund. Consumers who are patient can avoid the high fees or interest rates that come with these advances. Unfortunately, in today’s weak economy, a growing number of consumers are finding it difficult to pay their regular bills. They may have lost their jobs or seen their hours cut. For these consumers, cash advances might now be an unfortunate fact of life, at least until the economy again begins showing signs of life.