Q: I have a question about tax refunds–specifically, the H&R Block Refund VISA that they’re offering new this year.
I’m e-filing for free through the www.IRS.gov website, then linking to H&R Block from there.
The federal return is free, but not the state. But H&R Block will waive the $24.99 fee if you have your refund put on this VISA card they offer. Now, I did find the “fine print” and fee schedule, etc. It’s NOT a credit card, they say but there are quite a few fees and restrictions.
What I’d like to know is, have you heard of or researched this new way of receiving a refund? How does it compare with direct deposit, which is what I normally get? Most of all, is there any reason, consumer-wise, why I may NOT want this card, like more hidden fees, restrictions, etc.?
A: I can’t think of a single reason why you WOULDN’T want to have your refund direct deposited into your bank account — especially if your other option is a stored value card or refund anticipation loan from one of the major tax preparation companies.
The H&R Block Refund Visa is actually a stored value card, and not a credit card. The refund is put on the card and you can spend it. With a credit card, you can use the company’s money and then pay them back at the end of the month.
But because the card is a stored value card, that means your refund is subject to other kinds of fees. Typically with a stored value card, you’ll pay a buck every time you use the card. If you withdraw cash from it, you’ll pay additional fees. If you want to load more cash onto the card, it might cost you an additional fee.
My sense is that H&R Block is going to make more than the $24.99 fee that they will charge you for the state return if you put your refund on the stored value card. And, using the card it will limit how you use your funds.
Also, if you choose the stored value card, H&R Block will probably try to sell you on getting that money now, instead of waiting the 10 days for the government to deposit the cash. That’s called a refund anticipation loan and you will pay huge fees to gain access to your cash a few days early. It could eat up hundreds of dollars of your refund.
All of the major tax preparation companies offer refund anticipation loans and some sort of stored value card option. I’ve written stories at www.thinkglink.com about stored value cards. You can use the ThinkGlink search engine to find them.
My advice is to take a pass. Have your refund direct deposited into your checking or savings account instead. Then, the cash is there when you want it.
March 15, 2006.