If you happen to be in the camp that manages to come out the other side of tax season with a tax return, you know that receiving that check can feel like Christmas 2.0. It’s often viewed as “free money”, but the fact is that this is money that you have already earned. Treating it like “savings” is more beneficial to your financial health, especially if you need to pay off credit card debt. Even if you don’t have a ton of debt, consider that it’s easy to get lulled into a false sense of security when making purchases with credit cards because, in the moment, you don’t have to worry about that money. If you aren’t paying attention, or find yourself in a financial bind, the debt can rise to what seems to be an unmanageable number. And when you couple that with sky-high interest rates, it may feel impossible to pay off your credit card debt.
We here at Lendah feel that one of the best decisions you can make is to put your tax return to use and pay off some- if not all of- your credit card debt. This may seem like an obvious answer, but when it comes down to it, making the choice to utilize all of that money for your credit card can be difficult. However, we believe that this decision can truly improve your financial health. Here are our top three reasons why we believe your tax return is the key to solving your credit card debt problem:
1. You Will Save Money On Interest
Interest rates are only getting higher; according to CNBC, the Federal Reserve is set to raise interest rates as many as four times this year. By paying off a big chunk of your card, those rising rates won’t affect you as much. This is a good reason to get your taxes filed as soon as possible. The rates are due to start rising as early as March so you may not be able to escape the first round, but with luck – and a healthy tax return check – you can save yourself from the stress of increasing interest charges.
2. You Can Improve Your Credit Score
While many find the Credit Score to be arbitrary and would like to see the scale fade from use, it is still a tool used by most to determine your financial health. If you have a fair amount of credit card debt and are struggling to do more than just the minimum payment each month, your credit score could be seriously suffering. This can affect where and what you can rent, buying a house and even your ability to purchase items like engagement rings.
One of the best ways to improve your score is to strategically pay off your credit cards. No debt doesn’t necessarily mean that it’s good for your credit score. They want to see that you can use credit responsibly; oftentimes it’s not about how much money is on your card, but what percentage of the card you are using. If you have maxed out your cards, your score can take a hit and it will be very difficult to improve your score. But if you pay off your debt or just a significant portion of it with something like your tax return, your score is likely to improve dramatically if you can maintain a lower debt-to-credit-limit ratio.
3. You Can Make Room For Other Financial Goals
Life can’t just be about paying off debt and living paycheck to paycheck. Eventually, something has to give; It will either be your sanity or your budgeting goals, but we’re hoping you aim for financial freedom. The faster you can rid yourself of crushing credit card debt, the faster you can start reaching other financial goals like saving for retirement, the two-week cruise you’ve always dreamed of or a new home.
If you want, you can look at your tax return as an investment in your future. You may not be able to pay everything off and get started on your dreams right away, but if you take the steps to decrease your debt and embrace healthier financial habits, you will reach your financial goals one day.
Lendah Will Help You Consolidate Your Credit Card Debt
If you find that your tax return isn’t going to be enough to make a significant impact on your credit card debt, you can always look at other options to improve your credit health. Personal loans can be a huge help when it comes to credit card debt! Lendah offers debt consolidation loans and plans to help you overcome those daunting payments and interest rates.
Get started today on our website. Prefer to talk in person? Call us at 833-453-6324 and we’ll get you connected immediately with one of our loan experts.