 TITLE: Should I Use My Tax Refund to Pay Off Debt? CONTENT: What Are the Benefits of Using Your Tax Refund to Pay Off Debt?\n---------------------------------------------------------------\nAlthough there are differences between paying off credit cards and paying off loans, here are four good reasons to consider using your tax refund to pay off debt:\n*   **You'll save money.** Credit card interest can be high. If your credit card has an annual percentage rate (APR) of 25%, paying off $2,000 in debt now will save you roughly $500 in interest over the next year. Paying off your car loan or making an extra payment may save you less in interest; these types of loans typically have lower interest rates, and the amount of interest you owe tends to dwindle as the loan nears payoff. Still, money saved is money saved.\n*   **You'll reduce your monthly expenses.** Lower credit card balances mean lower minimum monthly payments. Paying off a card balance or loan entirely translates into one less bill to pay, month after month. That's money you can put toward savings or other needs. Don't have enough to pay off your whole loan or card balance? Set the money aside and use it to make or supplement your monthly payments. That'll increase your chances of making all your monthly payments on time, which is a win for your credit score.\n*   **You may increase your available credit.** Lowering your credit card balances will raise the amount of credit you have in reserve. And while it's better to have some cash set aside in an emergency fund for unexpected expenses, available credit can help you in a way that a maxed-out credit line cannot.\n*   **You could improve your credit score.** We'll cover more specifics on this in a moment, but in a nutshell, paying down revolving debt such as credit cards helps your credit utilization ratio, which can boost your credit score.\nThe main downside to using your tax refund to pay off debt is that you can't then use it for something else that needs priority. For example, if your roof is leaking and about to cave in, roof repairs might be worth considering instead. The same goes for necessary medical procedures, major car repairs, replacing the computer you use to run your business—important major purchases. Even in these cases, you might consider paying down your credit card balance, then using your card to pay for the purchase. That way, you can take advantage of purchase protections and rewards that come with your card. END