BOSTON (CBS) – A survey done by Capital One found that 65% of taxpayers believe that the best way to approach spending the refund is to be “practical.” 40% of those taxpayers wanting to save the money for a rainy day and 40% wanting to chip away at debt or make needed purchases.
So, I thought we should cover using your refund to pay down your credit card debt or pay it off completely if your debt is under $3,000.
I know there is nothing exciting about this suggestion. I know it is a nitty gritty practical idea but it is a good use of your refund. I do know you would like to reward yourself in some way with that refund but I also know that getting out of credit card debt is a very good thing!
The nation’s outstanding revolving debt, which is chiefly made up of credit card balances is over $995 billion, that’s with a B. The average household that carries debt month to month is about $7,500.
Using your refund dollars to pay down your debt is a good idea! Look at your cards and pay down the one with the highest interest rate first.
If you are carrying $3,000 on a card with a 15.5% interest rate which is just about the average right now you have just saved yourself $465 in interest charges over the next year.
If the $3,000 doesn’t wipe out the whole of your debt, consolidate your high interest rate cards to the card with the lowest rate. Work hard at paying down that debt by making payments each month that are larger than the minimum required.
Try living on a budget and not using your credit cards so you can pay down the debt quicker. Use your credit cards wisely and once out of debt resolve to pay your credit card bill in full each month.
Credit card companies are finding more ways to nickel and dime you in this economy. Good customers are being penalized by having their interest rate go up or their limit reduced. If you are late with one payment you could see your interest rate bumped up.
Use your refund as the first step to being debt free.
You can hear Dee Lee’s expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.
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