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Drowning in Debt? Throw Them a Brick!

I was watching an advertisement for H&R Block today (yes, it is that time of year again) and I noticed something that completely blew me away. All the ads I’ve seen are based around a person getting their money back instantly and being able to enjoy their money right away. Right now, H&R Block is offering their “instant refund” as a “refund anticipation loan” that you receive on a pre-paid Master Card. Doesn’t this sound like a great idea?

Assuming you are approved, (is it even possible to be declined these days) you receive your anticipated refund as a credit on the Master Card. Here we are, in the middle of a credit crisis in America and hey, if you want your tax refund, let’s throw it on a credit card for you. Just make sure to spend the exact amount of your refund or else you’re back on at 18 ½ percent! Want to transfer the cash to your bank account? That will be a $2.50 transaction fee from Master Card. Do you want to cancel your credit card? Call us up so we can offer to reduce your rates, then, if you choose not to, we can drop your card and negatively affect your credit even further! Can anyone else see any issues here?

They’ve decided to take the people who need to have their money ‘instantly’ and offer them the newest poison pill in our society – more credit. I am amazed by the people who have overpaid on their taxes all year but then need the refund before they walk out the door.

Obviously it’s not the government’s business to determine how much credit a person should take so no regulation is needed. I’m also not here to blame the credit card company for their business practice – credit is not forced on people and neither are poor spending habits. I’m just wondering how a company can promote a service like this as somehow helping people. If their motivation was client focused, why wasn’t a pre-paid debit card offered or a pre-pay only credit card – with no requirement to maintain an account?

The credit card obviously offers some interesting options for H&R Block. What happens if their client doesn’t deserve the refund they thought he did? He walks out with a credit of $1000, spends it, then realizes that he should have only received $500. Guess what? You can bet that H&R Block will want their money back and next month this guy will have a nice new $500 invoice from Master Card. Now, rather than having blown his refund and going back to life, this guy has blown his refund and owes an additional $500!

My advice:
1. Get a certified accountant to do your taxes – especially if you have any business income.
2. Wait for a refund in cash – then re-invest the difference
3. Even better, use your refund to pay off the other credit cards and then invest the difference.

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