So you beat the filing deadline and are actually getting a refund. Congrats! The first instinct may be to go out and spend that money on a luxury item you couldn’t otherwise afford. Or maybe even a big night out on the town. While that may sound like fun, you should reconsider once you have gotten over the initial excitement of getting your money back from Uncle Sam. This article discusses how to use your tax refund, but essentially gets it wrong when it comes to paying down high interest credit cards.
It came as no surprise to me that paying off high interest debt comes up as the number one idea. But, it’s only a good idea as far as it goes. If using your tax refund to pay down credit card debt is step 1 in an overall plan to pay it off in full within 12 months, then we agree that it is a good use of the money. However, if you owe $50,000 and your refund is $5000 and you have no idea of how you will ever pay off the remaining $45,000, then the advice is best ignored. If you find yourself with more debt than you can handle, then you need to seek out a competent debt settlement attorney that can help you craft a plan to eliminate all of your debt. There may be far better uses for your tax refund than just throwing it at your credit card debt.