13 worst things to do with your tax refund

People typically don’t want to pay more taxes than they need to, but a tax refund implies just that. Withholding more money than necessary each paycheck means that an individual forgoes the opportunity to earn interest on that money elsewhere. Approximately 77 percent of taxpayers receive a tax refund, according to the IRS.

Furthermore, some of the most popular ways to spend tax refund money can easily turn into some of the biggest tax refund mistakes. A recent GOBankingRates survey revealed several popular uses for tax refunds that can boost your financial well being, or work against it. Click through for 13 of the worst ways to spend your hard-earned tax refund check.

1. Pay Down Credit Card Debt

Using a tax refund check to pay off debt is the most popular way to spend a tax refund, as 27 percent of respondents plan to do so, according to the GOBankingRates survey. “The goal in spending a tax refund should be long-term financial security,” said Tim Gagnon, a professor of accounting at Northeastern University’s D’Amore-McKim School of Business.

“Just reducing [a credit] card balance to run it back up does no good,” he said. Eliminating a credit card completely, paying off a high-interest loan and avoiding another similar debt is, however, evidence that your spending habits are under control.

continue reading »