Low income Americans turn to tax refund advances

According to new federal data, Americans tight on cash and anxious for tax refunds are increasingly turning to prepaid cards and payment advances when getting tax preparation help.

This finding is raising concerns about whether consumers understand the fees that come with doing this.     

Apparently, low- income families are big users of “refund anticipation checks.” The checks are basically advances marketed as a way to defer payments of tax preparation costs and get refunds faster.

According to the IRS, the use of these checks is up 17% since 2011.

The Consumer Financial Protection Bureau says some consumers have complained about the fees linked to them.

The bureau is working on rules for prepaid cards that would require “easy to understand” information upfront outlining the costs and risks of using them.