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I almost got burned by one of those myself. Until I checked the fine print at the end, I didn’t realize there was a separate $40 charge for paying for TurboTax out of your refund (rather than with a credit card). That can’t cost anything on their end and seems designed to target people who don’t have the money lying around.

I mean, that sounds like a pretty fair service to me: offering short-term credit while also streamlining the customer acquisition process.

A few years ago my finance class had a homework assignment which was to calculate the interest rate you were paying for this "service". It was a good assignment, because there is no "right" answer, because it depends how you define certain values, but all the figures came back with this "service" is like a loan with a 40-80% interest rate.

A 40-80% rate per week!

If it's just regular filing, that's something like $70, and the IRS pays the refund in about a week. TurboTax claims they vouche for the validity of the filing, so there's little risk of it not coming through, and even if it does, they can just say, "oops, we can't file for you until you do XYZ" and boom, they didn't finish providing the service.

So, that's a $40 loan on $70 of principle, or 57% for that week. Annualized -- to make it commensurate with other interest rates -- that's (1.57)^52 = a f---ing lot.

It's a little better than that: 1.57^52 - 1.

R_n = (1 + R_0)(1 + R_1)...(1 + R_n) - 1

It's easier to just use log return:

r_n = r_0 + r_1 ... r_n


r = log (1 + R)

Anyhow, compounded returns aren't the best way to think about this. It's not like they could extend the period and realize the compounded returns.

Sure, that's a pretty high interest rate. If you have the liquidity, you definitely should pay upfront. But it's conceivable that for some (small) segment of the population, that loan is worth it.

Payday loans are a similar situation, it seems exploitative to many/most people. But those people who think it's exploitative are the ones who don't need the service in the first place. If you can avoid it, you should never ever get a payday loan. But if it's between a payday loan and missing a rent payment and living on the street, it's a pretty attractive and rational proposition.

Would it be better that a certain segment of the population not have any access to credit? Or is it better that they have access to expensive credit? Moreover, if they want some (expensive) credit, it's pretty paternal and condescending (and sometimes racist) to say that they aren't rational enough actors to deserve it.

It's not (only) that it feels explorative because of the rate; it feels explorative because they use dark patterns to make it non-obvious that there is a fee in the first place.

It's absurd to compare a simple interest rate to an compounding interest rate on revolving credit.

If it's a fair service then they should be able to be obvious and upfront about the difference between the two options.

Right, especially since it's so counterintuitive -- paying with a credit card usually costs them more so you don't expect that paying out of the refund would be the more expensive option.

In fairness, I may have missed something more obvious in the UX.

> In fairness, I may have missed something more obvious in the UX.

You didn't. It's phrased on purpose to not make it sound like you're paying for this "service". And the lettering does not stand out (compare to say all their annoying ads to make you upgrade).

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