In an effort to get a better handle on outstanding credit card debt and generally improve their financial situations, many consumers across the country are likely to be more careful about what they do with the money from their annual tax returns this year.
This year, the two most popular consumer plans for how to handle their tax returns are putting most of that money into savings or using it to find some debt relief by bringing their outstanding balances down, according to a new survey from the National Retail Federation. In all, 43.8 percent of those who expect to receive a tax refund this year say they will sock some of their money into savings, up from the 42.1 percent who responded similarly in 2011. Further, 39.4 percent of those expecting to receive refunds will use it to pay down debt.
"After a rocky few years, consumers are now more vigilant about how they spend their money and the importance of preparing for future financial stability," said NRF president and chief executive officer Matthew Shay. "Increased consumer savings proves extremely beneficial to shoppers and businesses in the long run, allowing future opportunities to invest in a large household item or even take advantage of a well-deserved family vacation."
But in fact, the number of consumers who plan to use their tax returns as a windfall to fund purchases has fallen, the report said. Only 28.7 percent of respondents will use the cash for spending on everyday expenses, and fewer will use it to make a major purchase of some kind. Only 12.3 percent will put it toward the purchase of a new automobile or television, and 11.3 percent will spend their tax return on a vacation.
Consumers have generally been more conscientious about trying to reduce their outstanding debt since the end of the recession, and that has become particularly true in the last year or so. But some experts also say that recent increases in balances and card use in general may be a sign that consumers, feeling better about the state of the economy, are turning back toward pre-recession spending habits. Meanwhile, others argue that those increases, which also included more charge offs and delinquencies, are the result of seasonal spending shifts observed every year.