Tax Refunds In a Day: Too Good to Be True?

Tax season is closer than you think. You can file and wait for your return, or – like at least 12 million taxpayers – you can receive it right away through what’s known as a Refund Anticipation Loan.

But they aren’t what they seem.’s Bob Sullivan of the Red Tape Chronicles explained that refund anticipation loans are nothing more than payday loans – your tax preparer gives you the money up front and later takes your refund as repayment. You get the cash right away, in as little as a day, and you pay no fees on the spot because the preparer deducts them from the loan.

But the shock is in the fine print. Refund anticipation loans have a 100-150% annual percentage rate. They may say the interest rate is only 3-4% but if you tease it out the rate skyrockets, Sullivan said, making these nothing less than a "terrible" deal.

There’s more. Sullivan discovered that our bailout money is actually paying for these loans. Santa Barbara Bank & Trust, a boutique bank in Southern California, is a huge player in the refund anticipation loan business. Most of the loans given out by Jackson Hewitt, the nation’s second-largest tax preparer, come from Santa Barbara Bank & Trust, which got nearly $200 million in TARP funds during the government bailout to shore up its balance sheet. So while the bank is lending money to people in anticipation of their tax refunds at 115% APR, taxpayer money is being used to fund these loans, according to Sullivan. Santa Barbara Bank & Trust replied that none of the bailout money is being used for the loans, but Sullivan countered that the bank would be unable to fund the loans if not for the Treasury’s capital injection.

For more on refund anticipation loans and what to look out for, visit