Besides well-known tax preparers such as H&R Block and Jackson Hewitt, tax refund products such as Refund Anticipation Loans (RALs) and Refund Anticipation Checks (RACs) are also offered at rent-to-own outlets, through check cashers, and even at used car lots. Prepaid credit cards may also be disguised as RALs. Anyone offering your tax refund in less than one week after filing may be charging you excessive fees for what is really a loan.
Due to recent legislation, most RALs are not offered anymore. Instead, preparers offer a similar product, called a Refund Anticipation Check, or ‘RAC'. With a RAC, the preparer sets up a temporary bank account where the refund is deposited. When the money arrives, the bank issues a check or prepaid debit card, less the preparation fees, and then closes the account. The fee structure with a RAC is similar to that of a RAL, which is why both products should be avoided if possible.
Updated: January 2017