“The credit card came to me in a sealed envelope so once I opened it up she said it was my card. Then that's where all the information was so you're kind of stuck,” she said,
Pamela quickly learned while she did have access to her refund money right away, she was often paying transaction fees to use it.
“I realized certain little fees were being removed like a dollar here and a dollar here, and I thought this could nickel and dime me into poverty,” she offered.
So Pamela decided to withdraw all the money left on the card, which was over a $1,000.
“Low and behold I was charged $20.00 for every $500.00 I removed of my card and my limit each time was only $500.00,” she recalled.
In all, Pamela says she paid about $100.00 in transaction fees just to get her tax refund.
“It just saddens me for me to go through this and see how much money I wasted thinking I was getting a deal,” she told Eyewitness News.
This year, H&R Block sent her a different card, which allowed her to log onto their website and e-file her federal taxes for free. She not only saved more than $200.00 in fees doing her taxes herself, but by e-filing she got her refund without paying a dime.
“It was free of charge and free for direct deposit. It was unbelievable,” she said.
Pamela says she's learned a costly lesson.
“Shop around. If you're not hard pressed to get money back immediately, shop around,” she advised.
Refund anticipation loans aren't illegal, it's just key to know the fees associated with it before you agree to what may seem like instant cash. A rep with H&R Block told us that any fees are disclosed to every customer before signing up for the RAL offers.
When it comes to refund anticipation loans, a rep also said, "We agree that the quickest, most cost-effective way for taxpayers to get their refunds is to e-file and direct deposit it into a bank account. If taxpayers choose a RAL, we encourage them to shop around. RAL’s at H&R Block are priced 40 percent less than the competition. We also encourage taxpayers to be informed consumers of any product at the tax desk - ask questions, know the fees, understand what you're getting."
Here’s some tax tips from NC Attorney General Roy Cooper office:
Don’t get shortchanged when filing your taxes
By Attorney General Roy Cooper
Many of us are feeling the pressure of the April 15 tax deadline and wish we had more time to get our taxes done. If you’re expecting a tax refund this year, you may be eager to file quickly and get your money fast. We all want a big refund check, but think twice before you opt for that “instant” refund, also known as a refund anticipation loan.
A refund anticipation loan, or RAL, may sound enticing if you’re in need of quick cash, but the fees can really add up. In recent years, more than 400,000 North Carolinians have paid an estimated $44 million in fees related to RALs, according to a study by the Community Reinvestment Association of North Carolina.
There are other ways to get your refund fast without paying all those fees. So before you take that rapid refund check, take a good hard look at what it could cost you.
- Accepting that check means you’re taking out a loan against the refund you hope to get back from the IRS. There’s no guarantee that you will get a refund from the IRS, and if you don’t, you’ll still have to pay back the loan.
- As with any loan, you’ll have to pay interest. But with RALs, the interest rate is usually much higher than conventional loans. You may also have to pay an extra filing fee on the RAL.
- You don’t need an RAL to get your refund back fast. You’ll likely get a refund in as little as one or two weeks if you file your taxes electronically—without having to pay a large fee.
There are many reputable tax preparation services that do a good job for their clients. But before you sign up with any tax preparation service, keep the following tips in mind:
- Check out the company. Call my office at 1-877-5-NO-SCAM toll-free within North Carolina, and check with your local Better Business Bureau.
- Watch out if they try to sell you an extra guarantee. These guarantees claim that the company will reimburse you if they make a mistake with your tax returns and your filing has to be amended. But in many cases, the tax preparer doesn’t keep that promise.
- Be skeptical of ads that promise to help work out your debt to the IRS for cents on the dollar. Many of these companies charge a hefty fee but rarely get results.
- If you have questions about something a tax preparer tells you about your taxes, check it out. You can contact the IRS at 1-800-829-1040 or the NC Department of Revenue at 1-877-252-4052.
Also, keep in mind that there are less expensive or even free ways to file your taxes:
- Many online tax filing programs provide discounts or are free to use. If you have questions about one of these programs, contact the IRS or visit www.irs.gov/efile/.
- Volunteer Income Tax Assistance (VITA) is a nationwide program that gives low and middle income consumers free help with their taxes. To locate the nearest VITA site, call 1-800-829-1040.
- In North Carolina, State Employees’ Credit Union and the Local Government Federal Credit Union both offer free tax help through the VITA program for families earning less than $42,000. Credit unions and other lenders may also offer more affordable ways to take out a loan against your refund if you really need one.
- You might be entitled to a refund even if you don’t have to pay taxes. Call the IRS or visit www.irs.gov/eitc to learn more and to see if you qualify for an Earned Income Tax Credit (EITC). The EITC is a refundable federal income tax credit for low-income working individuals and families.