Welcome to income tax time. If you planned ahead, you’ll not owe Uncle Sam anything by the filing deadline on April 15th. In fact, if you overpaid the tax man, you might even have money coming back. If so, it’s time to beware of what’s lurking out there to snare you. It goes by the name Tax Refund Anticipation Loan.

The concept is simple, with many firms delighted to loan money secured by your coming tax refund. Just sign a few papers and cash is quickly deposited into your personal account. How can you beat that?

There is, of course, a fly in the ointment. The loans offered will cost you an arm and a leg. This is because up-front fees charged, when figured over the very short periods of the loan, often no more than a week or so, work out to astronomical numbers. Credit card companies that specialize in soaking unfortunate cardholders at annual interest rates up to 30% are philanthropists by comparison. Refund anticipation loans that carry rates starting at about 50% can easily exceed 200%.

Where are these fast-cash opportunities found? You needn’t look far. The major marketer is America’s foremost tax preparer, H&R Block, which proudly offers this service through its 12,000 nationwide offices. Another is Jackson Hewitt, Tax Service, second in the business with 5400 franchised outlets. And not to be excluded from such a lucrative enterprise are many banks that operate through online facilitators such as TaxEngine.com. To the list you may add car dealers, check-cashing services, and others.

A concluding thought:
Even if you need money quickly, there’s rarely any reason for such a loan. A taxpayer that files electronically may expect a refund from the IRS within a couple of weeks. Nothing short of a pending catastrophe should lead you take such a beating.