How Savvy Consumers Use Their Tax Refunds

Non-profit credit counseling agency Take Charge America offers money management tips for consumers receiving a tax refund

Business Wire


It’s tax season, and many Americans look forward to receiving a refund. For savvy taxpayers, a refund provides an opportunity to make good use of the cash, whether by paying down debt or building a rainy day fund.

“A tax refund often feels like ‘free’ money, and many people use the funds to splurge on expensive items they wouldn’t otherwise purchase,” said Mike Sullivan, chief education officer for Take Charge America, a national non-profit credit counseling agency. “However, a refund presents a unique opportunity to use the money to improve your family’s financial well-being now and in the long term.”

Sullivan offers five tips for consumers who receive a tax refund:

  1. Pay off debt: When you receive your check, resist the urge to spend your money on a shopping spree, fancy dinner or pricey vacation. Instead, use your refund to pay down credit card balances, student loans, auto loans or other debt.
  2. Pay down your mortgage: Direct your refund toward your mortgage principal. Even one extra payment each year can shave noticeable interest off your mortgage.
  3. Boost your savings: If you’re debt-free, put your money toward your emergency savings fund, retirement plan or college savings account.
  4. Adjust your withholding: File a new W-4 to increase your allowances and pay the appropriate amount of taxes throughout the year. Use the IRS withholding calculator and aim for the number of allowances that satisfies 100 to 110 percent of last year’s tax payment.
  5. Use direct deposit: After you adjust your withholdings, set up an automatic deposit to direct the money you would have spent on excess taxes into an interest-bearing savings account. You won’t notice the difference in your paycheck – it’s money that would have been withheld for taxes – but your contributions will quickly add up.

“While it’s fun to receive a windfall of cash, it’s important for consumers to understand the IRS isn’t giving away money – they’re returning money they borrowed, interest-free, all year long,” added Sullivan. “It’s a good idea to adjust your withholdings to break even and make your money work for you – not just the government – throughout the year.”

For more financial tips, visit

About Take Charge America, Inc.

Founded in 1987, Take Charge America, Inc. is a non-profit agency that provides financial education services, including credit counseling, housing counseling, student loan counseling and debt management. It has helped more than 1.6 million consumers nationwide manage their personal finances and debts. To learn more, visit or call (888) 822-9193.

Aker Ink
Andrea Aker, 602-339-7339