Press Releases

For Immediate Release
January 09, 2006  

Refund Anticipation Loans: A High Price to Pay to Borrow Your Own Money

(Madison) With tax booklets arriving at local libraries, the enticing TV and radio ads have begun, encouraging taxpayers to apply for a speedy Refund Anticipation Loan (RAL). But before people go running to the nearest tax preparation company, consumers should be completely aware of the high costs associated with a RAL and know that there are other speedy options out there that are completely free.

“Essentially, taxpayers who use RALs are paying a high price to borrow their own money,” said Governor Jim Doyle. "These loans have high, often hidden costs. I want the hardworking people of Wisconsin to know that a RAL is not the only resort -- other options are available."

Taxpayers can visit any free tax preparation site, commonly referred to as VITA, where they can have their taxes electronically prepared for free. By e-filing a return, the refund can be directly deposited into the taxpayer's checking/savings account within a matter of days, all free of charge. But if a person does not have a checking/savings account, they usually go to a paid tax preparer and pay for a RAL in order to have money in their hand fairly quickly.

To help the 'unbanked' avoid a RAL, several dozen VITA sites have partnered with local financial institutions to offer taxpayers the opportunity to open a personal checking/savings account while visiting the VITA site. Opening an account would allow a taxpayer to receive a refund via direct deposit within a few days. In addition, the new account holders would also be able to build their credit histories and more easily save money by not having to pay for check-cashing services.

In 2003, approximately 114,000 Wisconsin taxpayers paid about $28.5 million in RAL and associated fees. An average tax refund of $2,000 can carry RAL-associated fees of $250 or more. That is equivalent to paying an annual interest rate of 521% for a 10 day loan! Plus, if a refund is delayed or denied for any reason, the consumer is responsible for paying back the loan as well as all fees, which typically increase dramatically after 10 days.

Before electronic filing, these high interest loans may have been attractive because paper tax returns would take several weeks to process. But with today’s e-filing, state and federal refunds are available within a matter of days when deposited directly into a checking or savings account, all at no cost to the taxpayer.

"With tax season upon us, I encourage people to take advantage of the free VITA services," said Secretary of Revenue Michael L. Morgan. "The partnership that has been built between the financial institutions and the VITA sites is a win-win situation. No one should ever have to take out a loan to access money that is rightfully theirs."

Partners: Wisconsin Department of Financial Institutions, Wisconsin Department of Revenue, Wisconsin Department of Agriculture, Trade and Consumer Protection, Wisconsin Council on Children and Families, Wisconsin Bankers Association, Community Bankers of Wisconsin and Wisconsin Credit Union League.

For more information:

• To find a VITA site, call 1-800-829-1040 or visit and type in VITA
• Contact information for participating credit unions is available at