What’s not to love about tax time? Some welcome extra cash in the form of a tax refund – and with the average refund sitting at around $2,600, it’s certainly a valuable boost to our budgets.
The question is, what will you do with your tax refund? Instead of using the cash for some retail therapy, it’s worth looking at other options. A few easy steps can make your tax refund go a lot further.
Here are five ideas to get you started.
1. Kick-start a savings plan.
Why not stash your tax refund cash in a savings account. That’s a great idea if you’re planning to save for a specific goal or you just want to grow rainy day money for emergencies.
The good news is, Australia’s Defence Bank has a range of savings accounts that makes it easy to start your savings plan. Make it a habit to add a little more each payday, and you could be surprised at how even a small tax refund can grow into an impressive balance over time.
Don’t forget, you can also keep adding to your savings every time you spend with Round Ups. It’s the easy way to keep adding to your savings on a daily basis.
2. Pay off your credit card.
Paying down debt can be a smart way to put your tax refund to work. By clearing the slate on your credit card, or just reducing the balance, you’ll save on interest charges.
Some credit cards charge interest rates above 15%, which can make it hard to get on top of the debt. If you’re struggling to whittle away a card balance, it can be worth switching to the Defence Bank Foundation Credit Card. Pay just 3.99% p.a. for the first six months, and a tiny 8.99% p.a. ongoing.
3. Make a lump sum payment on your home loan.
Using your tax refund to make a one-off payment on your home loan can mean pocketing big savings over time. The payment will come straight off the outstanding loan balance, which lowers next month’s interest charge, so more of your regular repayment goes towards paying down the principal.
Long story short, making a lump sum repayment on your home loan helps to swing the loan pendulum in your favour. You can pocket a supersized saving in long term loan interest while becoming mortgage-free sooner. At Australia’s Defence Bank, with our flexible home loan features, you can even make unlimited extra repayments without penalty on your fixed-rate home loan.
To see just how much you could save by using your tax refund to make an extra payment on your home loan, head to Defence Bank’s lump sum repayment calculator. The results can be impressive!
4. Stick it into your home loan offset account.
If your home loan comes with an offset account, think about sticking this year’s tax refund into your offset account to reduce the amount of interest you need to pay.
5. Give yourself time to think.
If you’re not sure how you’ll use this year’s tax refund, give yourself thinking time, while still putting the money to work, by depositing your refund in a term deposit.
The beauty of this approach is that you’re shifting your refund out of your everyday account, where you could be tempted to spend it, and into an environment where it’s earning a competitive rate of interest.
A Defence Bank term deposit lets you get started with just $1,000, with terms from 30 days to 24 months. That’s plenty of breathing space for you to decide how you’d like to put your tax refund to good use.
Important note: This information is of a general nature and is not intended to be relied on by you as advice in any particular matter. You should contact us at Defence Bank to discuss how this information may apply to your circumstances.