Using Tax Refunds to Pay for Christmas

Posted by: Michael S. | Dec 20,2007


There’s irresponsibility afoot.  I’ve heard of people using their tax refunds to pay for their Christmas shopping every year.  By relying on their tax refund, they find no problem in putting their Christmas gifts on credit.  It’s going to be paid for anyway, so what’s the problem?  Silly logic.  You know what would be better than relying on your tax refund to pay off bills?  Being frugal and using that tax refund for savings.  

That’s only half the issue though.  By the time your tax refund rolls around, you’ve already accrued interest on your Christmas purchases – at least four months worth of interest.  Even so, I would imagine that most people who get their tax refund don’t automatically spend that money on their credit card bill.  Instead, they put it in their checking account and pay off the credit card bill bit by bit.  This is absolutely not the way to go about paying off your Christmas purchases.  If you are relying on a tax refund to pay for Christmas, you’ve got to immediately put that money towards your credit card balance so that interest never gets out of control.  Chances are too that your refund will not cover every Christmas cost, so you’ll be paying interest on the difference as well.  

That’s the negative view.  Using your tax refund to pay for Christmas purchases has its good side as well.  It shows, at the very least, that you are mindful of the money spent at each Christmas.  Even paying off some of your Christmas credit is better than none.  Worse are those people who leave Christmas spending laying dormant on the bill and not having it fully paid off until the following Christmas rolls around.  Five years down the line, you could have five years of Christmases still part of your credit card balance.  

As has written about here before, you need to count your money as its being spent, budget each one of your gifts, and minimize the amount you use credit.  You also need to have a way to pay off the gifts sooner, rather than later.  Paying with cash, rather than waiting for refund time to roll around, means that you’ll never spend more than you have and you won’t have to spend time next year trying to pay it off.  

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