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10 Great Ways To Spend An Income Tax Refund


Are you expecting a substantial income tax refund this year? If so, you are in the majority, with the average refund being around $3,000 according to the IRS. Rather than having those dollars become a part of your regular spending routine, get the most out of your cash. Here are 10 great ways to spend your income tax refund.

1. Pay down high-interest loans and lines of credit. With average annual interest rates for credit cards and personal loans hovering around 28%, paying off that credit card before making other investment decisions makes good sense.1

After paying down your high-interest credit cards, switch to one with lower interest. Our Select Visa® offers rates as low as 8.99% APR and 0% Intro APR on purchases for the first six months.2 

2. Fund Your Retirement Account. If you haven’t invested in a retirement account, seriously consider making a contribution to one right away.

An Individual Retirement Account (IRA) can help you secure your financial future. They offer tax advantages to help your money go further. You can open one through us. We offer a Traditional IRARoth IRA, and SEP IRA.3

3. Invest it. Instead of just working for money, let money work for you. If you invested one lump sum of $1,500 every year in the stock market for 30 years, assuming a 10% return,4 you’d have approximately $249,000!5 (Of course, do your research first before making any investment decisions and talk to licensed investment professionals).

4. Open an emergency account. Most Americans don’t have money set aside for those financial emergencies that always seem to happen when there is no cash in the coffer. A large tax refund is a great start for an emergency account. Experts recommend that it should eventually total between three to six months’ worth of essential living expenses.

Our Online Savings account pays an impressive 4.00% APY6 with Direct Deposit (3.50% APY without it). If you’re searching for an account that offers a good yield with controlled access, consider our Rainy Day Savings account. You earn 3.04% APY7 and can make a maximum of two free withdrawals per calendar year.  

5. Pay for repairs. Maintaining expensive possessions now will result in dollars saved tomorrow. Use the money to repair that leaky roof before it develops into a bigger problem; replace those dangerous bald tires with new, safe ones.

If you need to make a big purchase that requires funds beyond your tax return, we can help. For home repairs, we offer a home equity line of credit (HELOC) with rates as low as 8.49% APR8 when you have a Direct Deposit. And our new and used auto loans start at only 8.49% APR.9 

6. Invest in yourself. Investing in your emotional, physical, intellectual, and career growth is a wise use of money. Whether it’s paying for a gym membership, a cooking class, or continuing education courses, you’ll feel the effects of this type of investment fast. And can lead to career success that earns you more money.

7. Make an extra home mortgage payment (or two). Though you won’t feel the benefit immediately, doubling up on a mortgage payment now can save you months of mortgage payments later.

Don’t have a mortgage but are ready to jump into homeownership? We can help with our mortgage company, Community Mortgage Funding (CMF).10 You’ll get competitive rates and excellent service. 

8. Donate to a charity. Giving back to the community is a wonderful way of supporting a cause you’re passionate about. Even better – in many cases, at least a portion of your donation is tax-deductible, too.

9. Open a College Savings Plan for your child. A four-year, out-of-state college education can cost well over $100,000. Save for your child’s college education with a college saving plan. For the most part, withdrawals are completely tax-free when used for higher education purposes. Talk to a licensed investment professional about your different options.

A Coverdell Education Savings Account is a nice place to start saving for college. You can use the funds to pay for qualifying tuition, books, supplies, and more. And you can contribute $2,000 per child per year. 

10. Plan a vacation. If you are in a fluid financial position and can afford to treat yourself, do something you’ve been dreaming of. Money is to be enjoyed as well as earned, saved, and invested. Go ahead. Book a trip to a place you’ve always wanted to visit.

Final Thoughts

Although all the these ideas are excellent uses for a lump-sum amount of cash, remember that instead of planning for a refund, it could be more beneficial to come out even. A tax refund is an interest-free loan to the government; it’s money not in your pocket every month that you could use to manage expenses and savings. If you have been getting a tax refund each year, consider changing your withholding exemptions so less tax is withheld from each paycheck. While a tax refund may feel like a gift from Uncle Sam, it’s not—it’s money that you have overpaid on your income taxes. That said, if you use this as a form of saving, we hope these 10 tips help you spend your income tax refund wisely.

Thanks to our friends at Balance for this content. This publication is only intended to be used for general informational purposes. Consult a tax professional for the most current data and personal advice.

1. “What is the average credit card interest rate this week? March 17, 2024,” Retrieved March 17, 2024,

2. APR=Annual Percentage rate. Rates are subject to change at any time.

3. Consult your tax advisor regarding tax consequences and your specific situation.

4. O’shea, Arielle and Royal, James, (5 March 2024) “What is the average stock market return?” Retrieved March 14, 2024,

5. “Savings Calculator,” Retrieved March 14, 2024,

6. *APY = Annual Percentage Yield. APY is the annualized rate based on a compounding period of one year. When the deposited money earns dividends and the accumulated dividends starts earning dividends as well, we are talking about compounding. Fees could reduce the earnings on an account. All yields except Certificate yields are subject to change retroactively to the beginning of the month. Rate bonus for $1,000 monthly Direct Deposit into a Farmers Insurance Federal Credit Union Checking Account. No branch or call center access with this account.

7. *APY = Annual Percentage Yield. Rates are subject to change at anytime. Limit one Rainy Day Account per qualified membership. Rainy Day Savings is an interest earning savings account eligible for 3.04% APY interest on balances up to $2,000 and the standard Membership Savings rate on balances over $2,000 when funded via recurring ACH deposit or other qualifying external funds. Dividends are calculated by applying a periodic rate to the Average Daily Balance in the account for the Dividend period. Interest earned will be credited to the account at the end of the statement period. This account is limited to two withdrawals per calendar year, each withdrawal in excess of this amount will incur a $20 excessive withdrawal fee that must be paid at the time of the withdrawal. This account does not qualify for withdrawal access via debit or check and does not support transactions originating via VRU, online banking, mobile banking, or ATMs. Withdrawals can be made in person at a Credit Union branch or by calling us at 800.877.2345. This account does not qualify for overdraft protection. Account holder must be a member with a regular share account who is in good standing. Current interest rates and the annual percentage yield may be found at the Credit Union’s website, may be verified at a Credit Union Branch or by calling 800.877.2345. Interest rates earned and qualifying dollar amounts for interest earned are subject to change at any time. APYs and eligibility criteria are subject to change at any time. Fees may reduce earnings.

8. APR = Annual Percentage Rate. APR is the annual rate of interest that is paid on an investment, without taking into account the compounding interest within that year. Rates are subject to change at anytime. 0.50% Rate discount for $1,000 monthly Direct Deposit into their Farmers Insurance Federal Credit Union Checking Account and Automatic Payment/Folio Deduction. There is a $500 refinance fee for Home Equity Loans booked within the last 12 months, unless $20,000 new cash is added to the loan request.

9. APR=Annual Percentage Rates. Rates shown are our preferred rates based on credit worthiness and a 0.50% Auto Loan discount for Direct Deposit/Folio Direct Deposit going into a FIGFCU Checking Account (either High Yield or CashBack) in the amount of $1,000.00 or more monthly and Automatic Payment/Folio Deduction. Rates and terms are subject to credit approval. Other rates and terms are available. Other restrictions may apply. Financing available up to 130% of the Purchase Price, including tax, license, warranties and negative equity on a trade for qualified borrowers. Please speak with a Loan Representative for complete details and qualifying criteria. Rates and terms are subject to credit approval, are subject to change at any time and without notice. All values are determined by the Credit Union using either vehicle cost or Kelly Blue Book/NADA, whichever is lower. Other rates and terms are available.

10. Farmers Insurance Federal Credit Union: NMLS# 408877. Community Mortgage Funding, LLC, NMLS #266418. For full CMF licensing information, visit

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