Americans Using Tax Refunds for Credit Card Bills, Not Investments
According to a new survey from Edward Jones, 53% of Americans are using their 2016 tax refunds to pay for “necessary expenses,” like credit card bills and student loans. Only 31% of respondents plan to save their refund money, and 6% are choosing to invest it.
Having children in the household played a major role in how survey participants allocated their funds. 66% of taxpayers with children chose to use their refunds for necessary expenses, compared to 46% of people without children. Some parents use their credit cards to take advantage of Black Friday holiday sales, and then pay off their bills with their tax returns the following year.
Millennials were more likely to save their refunds than other generations (33% of Millennials vs. 31% of Baby Boomers and 26% of Gen Xers). 15% of Baby Boomers said they would use their money toward vacations and other leisurely expenses, compared to 9% of Millennials and 6% of Gen Xers.
While many Americans are using their tax refunds to pay off credit card debt, others are paying their taxes with credit cards. This is a costly option though. Most payment processors charge a 2% fee for credit card payments, in addition to the fees the credit card company may put on the transaction. If you owe money to the IRS, explore all of your payment options before choosing to pay your debt by credit card.