What Does a RAL Cost?

H&R Block's average refund anticipation loan of $3,000 costs $62.14 when taken on an H&R Block Emerald Card. This includes a finance charge of $32.19 and a refund account fee of $29.95 (except in California, where there is no refund account fee for a RAL).

This is a cost of $2.07 per $100 borrowed, which in many cases is less than the cost of a credit card cash advance, a bank overdraft fee or in many cases, using an ATM.

Sample RAL Cost Calculation*

 
$3,000.00
   Average loan amount
 
-$29.95
   Refund account fee established by the lending bank
 
       -$32.19
   Bank finance charge
 
=$2,937.86
   Loan amount after bank fees
       
      The $62.14 in bank fees represents $2.07 per $100 borrowed.
*This example does not apply in the state of California. In California, the way the APR is calculated is different, although the cost of the loan remains the same.

APRs and RAL Pricing

Refund anticipation loan lenders are required by the Truth in Lending Act to disclose the finance charge as an annual percentage rate. But an APR doesn't accurately reflect the cost of a refund anticipation loan. An APR is the yearly cost of borrowing money, divided by the time it takes to repay. Credit card balances, home and auto loans, all have finance charges disclosed as APR and all can take years to repay. But, a refund anticipation loan is typically repaid within 12 or 13 days.

Two alternative ways to measure cost are 1) dollars and cents, and 2) percentage of the loan amount.

  1. The cost of the average refund anticipation loan of $3,000 through H&R Block is about $62.
  2. The cost is 2.1 percent, which is the total cost as a percentage, though the exception to this would be California.