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Use Tax Refund for Debt Reduction

Created: On March 3, 2010 @ 6:00 pm In

Are you getting a tax refund this year? If so, you may already have a  list of things you’ve been waiting all year to purchase. A survey by the [1] National Retail Federation (NRF) found that about 13% of people expect to use a tax refund for a major purchase such as a TV, furniture, or car.

But is shopping the best use of your tax refund? Why not put that money toward a debt reduction program? About 44% of Americans expect to pay off debt with tax refunds this year, according to the NRF.

Pay off Credit Card Debt

If you’re like many Americans you may be carrying thousands of dollars in [2] credit card debt. Think of all the interest you would pay over the years if you only make the minimum monthly payment.

Putting a tax refund toward your debt is going to slash your balance faster and reduce the total amount of interest you pay.

Debt Calculator Can Help 

Use a debt calculator to see how making a one-time payment can impact the monthly payments on your credit card debt. If you’re struggling with the idea of paying down debt or putting a tax refund into savings, use this [3] debt calculator to compare both strategies.

Add to Savings

You may be fortunate enough to have a large enough tax refund to completely pay off credit card debt and have enough left over for another purpose. If that is the case, consider whether it is more prudent to put the remainder in a savings account rather than make a purchase.

Article printed from DebtHelp.com Blog: http://www.debthelp.com/blog

URL to article: http://www.debthelp.com/blog/2010/03/03/use-tax-refund-for-debt-reduction/

URLs in this post:
[1] National Retail Federation: http://www.nrf.com/modules.php?name=News&op=viewlive&sp_id=893
[2] credit card debt: http://www.debthelp.com/blog/2010/02/26/credit-card-debt-and-minimum-payments/
[3] debt calculator: http://www.debthelp.com/calc/payorinvest.html