This tax season 10% of Americans will let someone borrow them their own money through a refund anticipation loan. Rates might be as high as 744%. A rapid refund is just your income tax refund given to you on the spot by your tax preparation service- usually within 1-2 days. Rather than waiting for your tax return to come through the mail or via direct deposit directly from the government some people are choosing to get money in their pockets immediately at a great expense to themselves. Despite the length of the loan lasting only about 10 days they are costing individuals hundreds of dollars in some cases.
Overall this predatory lending practice is estimated to cost Americans as a whole about 500 million dollars a year. Unfortunately poor people tend to be affected the most because they have a greater need to get their money as fast as they can. Those targeted most tend to be recipients of EITC, the Earned Income Tax Credit. They recently accounted for 55% or refund anticipation loans. The program, formed in 1975 to help low wage workers is being undermined by tax preparation services that are eating away at these refunds. Refunds that are being awarded based on the EITC cornerstone that qualifiers for EITC get most of the federal taxes refunded in an attempt to relieve poverty for hard working people.