Each year, more than 1.5 million taxpayers obtain refund anticipation loans (RALs). This year, the number may be higher as a result of the government shutdown. While, RALs provide faster access to your money, they come with high fees and should only be used as a last resort. These “cash advances” are a potential for scams; before using these loans, take these actions:
- Assess the cost. While some national tax chains promote this service as a “free” cash advance, fees may apply for applying for the advance, checking your credit, and transferring the money to you. Costs for your refund advance check range from $29 to $65. If your refund is on a prepaid debit card, there will likely be additional fees.
- Beware of loan terms based on timing. Additional charges may occur if your refund is delayed.
- Compare other options. Seek less expensive, small-dollar, short-term loans from a community bank or credit union, or a zero-percent credit card. A $35 charge to defer a $350 tax preparation fee for two weeks has an APR of 174 percent.
- To avoid late fees for bills, contact your creditors. Utility companies and medical providers may offer no-cost extensions or no-cost payment plans.
Always be sure you are doing business with a reputable tax preparer. Check credentials and references. Avoid tax preparers who charge fees based your refund amount, or who deposit your refund in their bank account. Another fraudulent activity is filing false information to increase the amount of the refund.
For additional information on tax refund advances, click here.
- Have students search online for costs for refund anticipation loans.
- Have students prepare a video presentation on avoiding refund anticipation loans.
- What advice would you give a person planning to obtain a refund anticipation loan?
- How might community organizations and government agencies assist people who are considering a refund anticipation loan?
While you might think that saving for college, retirement, or buying home are the reasons Americans save, according to a recent survey, travel was reported as the top priority. In a study of 2,500 adult Americans representing varied demographic, geographic, economic, and social groups, 45 percent of respondents set aside money for traveling. This was especially true among younger respondents, who prefer travel experiences over savings to buy a home.
After travel, the main priorities for saving by Americans are:
- for an emergency fund (37 percent)
- for retirement (30 percent)
- to buy a house (21 percent)
- to buy a car, truck or motorcycle (20 percent)
For additional information on saving priorities, check out these two resources:
- Have students conduct a survey among people they know to determine the main reasons for saving.
- Have students talk to others to obtain ideas for building a person’s savings account.
- What do you believe are reasons people prefer saving for travel over other financial goals?
- Describe other actions that might be taken to motivate people to build their savings?
According to its last Consumer Sentinel report, the Federal Trade Commission received 371,061 identity theft complaints in 2017, down from 399,222 the previous year. That’s good news, but the 2018 Identity Fraud Study issued by Javelin Strategy & Research tells a darker tale. Based on random survey of Americans, it revealed that there was an 8 percent increase in identity fraud (the fraudulent use of someone’s personal information) from 2016 to 2017, and losses rose from $16.2 to $16.8 billion. Javelin also notes that while the chip cards have cut down on fraud terminals or by cloning devices, the drop has been more than offset in online theft and fraud.
For More Information, click here.
- Ask students if anyone has his/her identity stolen. If so, what has been their experience?
- Ask students to prepare and then share a list of steps that they can take to reduce chances of becoming identity theft victims?
- How can you detect if you are a possible victim of an identity theft?
- If you become a victim of identity theft, what steps must you take immediately?
It’s possible to add $500 or $1,000 to your savings with a simple action. Clark.com suggests using store receipts to save for the future. Many retailers display a “You Saved” amount on a receipt for items on sale and store discounts. By putting this amount in a savings account you can avoid spending the “saved” money on other items.
Collecting receipts in an envelope or box, or scanning them to an app, can also help analyze buying habits to make wiser purchases in the future and not make as many trips to the store. This action can result in an extra amount each month added to your savings. This money can be added to your emergency fund or retirement account.
For additional information on the receipt savings trick, click here.
- Have students locate examples of receipts that show “amount saved.”
- Have students talk to others to obtain ideas for methods for building a person’s savings account.
- What do you believe are the benefits and drawbacks of using this system?
- Describe other actions that might be taken to motivate you and others to build your savings?
As you walk into your bank, you are met by a video teller. These robo-banks allow you to connect with financial specialists based on your needs through a virtual concierge and videoconferencing. These banking staff members are located hundreds and thousands of miles away. Banks benefit from these actions with fewer branches and fewer employees covering customers in many geographic settings.
Other actions being taken by banks and other financial institutions to better serve customers include:
- A variety of services to enhance the banking experience, such as offering co-working spaces for customers who work remotely.
- Payment systems in the athletes’ Olympic pins to complete purchases transactions at the 2018 Winter Games.
- Customers can pay with a facial recognition scan in some retail settings.
- Financial services offered through Alexa (Amazon), Siri (Apple), and Google Assistant allowing bank and credit card customers to check their balances, pay bills, and send money.
For additional information on technology banking trends, click here.
- Have students talk to two or three others to obtain their ideas about: (a) future banking technology, and (b) the setting and services of the bank branch of the future.
- Have students create a presentation or video that communicates future banking activities.
- What technology services do you desire from a bank for your financial services?
- Describe actions banks might take to better serve the needs of customers.
Are you looking forward to getting your tax refund in the New Year? Tax identity thieves may be looking forward to getting your refund too. That’s why the Federal Trade Commission has designated January 29-February 2, 2018 as Tax Identity Theft Awareness Week.
Tax identity theft happens when someone uses your Social Security number (SSN) to get a tax refund or a job. You might find out it’s happened when you e-file your tax return and discover that a return already has been filed using your SSN. Or, the IRS may send you a letter saying more than one return was filed in your name, or that IRS records show you have wages from an employer you don’t know.
Learn to protect yourself from tax identity theft and IRS imposter scams, and what to do if someone you know becomes a victim. The FTC and partners including the IRS, the Department of Veterans Affairs, and the Treasury Inspector General for Tax Administration will be co-hosting free webinars and Twitter chats during Tax Identity Theft Awareness Week. Visit ftc.gov/taxidtheft for details about the events and how to participate.
For more information, click here.
- Ask students if filing early may avoid e-file tax identity theft fraud if someone files before they do.
- Ask students what steps should they take if their identity is stolen?
- How can one protect from tax identity theft and IRS imposter scams?
- What can you do if you or someone else you know becomes a victim of identity theft?
Can you imagine getting paid each day that you work? That’s the idea behind Instant Financial’s app, which puts cash in the hands of workers on the same day they work. This program attempts to reduce absenteeism and employee turnover for restaurant chains.
At the end of each workday, employees may take 50 per cent of their pay for that day and transfer it to an instant account; the other half is paid at the end of the regular pay period. Funds in the Instant account may be accessed with a debit card or transferred to a bank account.
The app can reduce the use of payday loans, with exorbitant borrowing rates, as workers have access to funds between pay periods. Instant Financial makes money from fees charged employers and merchants when debit cards are used; although employees may pay ATM fees.
A major concern of the app is that it might discourage long-term financial planning. Poor budgeting habits could result in increased use of debt due to a lack of funds at the end of the month. Employees who use the app are encouraged to practice wise money management, including creating and building an emergency fund and other savings.
For additional information on instant pay, click here.
- Have students talk with others about the benefits and drawbacks of an instant account.
- Have students describe two situations: (1) a person who used the instant account wisely, and (2) someone who mismanaged their money as a result of using the instant account.
- What factors might be considered when deciding whether or not to use an instant account?
- Describe how an instant account might result in improved money management and in weakened money management activities.
Most financial institutions offer overdraft programs for checking accounts, which for a fee covers a transaction where there is not enough in the account. However, this service can result in several fees before the next deposit is made. For debit cards, an overdraft fee cannot be charged unless you have agreed (“opted in”) to these fees.
To reduce or eliminate overdraft fees, these actions are suggested:
- carefully track your balance; sign up for low-balance alerts
- check your balance when making a debit card purchase; also consider other checks that may not yet cleared
- do not opt-in to an overdraft program for your debit card, or opt-out if you are currently opted in; while your debit/ATM may be declined, you will avoid high fees
- link your checking account to a savings account to cover overdrafts
- contact your financial institution to determine if you are eligible for a line of credit or a linked credit card to cover overdrafts
- compare account fees at other financial institutions
Complaints related to overdraft fees or other financial services may be submitted at http://www.consumerfinance.gov/complaint/ or by calling 855-411-2372.
For additional information on overdraft programs, click here.
- Have students search online or contact the costs associated with overdraft fees at various financial institutions.
- Have students prepare a creative presentation describing actions to take to avoid overdraft fees.
- Describe situations that might result in overdraft fees.
- What are methods to take to avoid overdraft fees?
Payday lenders see borrowers as prey, people floundering in financial difficulty.
The Consumer Financial Protection Bureau is planning to release proposed rules related to loans and other short-term borrowing, such as auto title loans. These efforts will include requirements that payday lenders make sure borrowers are able to repay the loans.
Payday loans are usually viewed as a temporary financial solution. However, quite often borrowers need more time. As a result, consumers get trapped in rolling over their debt and may be charged as high as 700 percent on an annual basis. According to the Pew Charitable Trusts, 12 million Americans use payday loans each year, resulting in $7 billion of interest and fees.
For additional information on payday loans, click here.
- Have students ask people to describe situations in which a person might use a payday loan.
- Have students create a list of methods that might be used to inform others of alternatives to payday loans.
- What are benefits and drawbacks of payback loans?
- What alternatives might be considered instead of a payday loan?