Survey: Consumers Plan to Save Tax Refunds, Pay Off Debt
The National Retail Federation’s annual survey shows consumers are using their refunds to build up their finances and to a lesser extent, pay down debt.
3/6/2018 8:00 AM
Consumers will use money from their tax refunds to build up their savings or pay down debt in 2018.
According to the National Retail Federation’s (NRF) annual Tax Returns Survey, 65 percent of taxpayers say they are expecting a refund, and 49 percent of that group report they will put the money into savings—the highest level in the 12-year history of the survey. Last year, 48 percent of respondents said they would save their tax refunds, according to the survey by the NRF and Prosper Insights and Analytics.
Thirty-five percent of respondents said they will pay down debt using their tax refunds. The NRF reports this is in line with last year’s results and the lowest level of consumers planning to pay their debt with the extra money since 2016. A peak 48 percent of respondents planned to pay debt with their refunds during the recession in 2009, it reports.
“Tax return season is a time when consumers plan and prioritize financially, whether it is paying down debt or saving for a rainy day,” NRF President and CEO Matthew Shay said in a news release. “With the passage of tax reform and the expectation of more disposable income, we expect to see consumers prioritizing how and when they spend their hard earned dollars, especially during the back-to-school and holiday seasons.”
Collection agencies can remind consumers how they can use some or all of their tax refund to help pay a debt during tax seasons.
Many debt collection agencies encourage their collectors to bring up tax refunds during conversations with consumers, Collector magazine editor Anne Rosso May reports in the February issue. Remember, consumers may not even be thinking about their refund yet, or it may not occur to them to use it to help pay down their debt, Rosso May reports. Try asking, “Are you expecting a tax refund this year?” or “Have you thought about using your tax refund to pay this?”
Another survey, conducted by Qualtrics and Credit Karma Tax, found that 62 percent of Americans expect to get a tax refund in 2018, and 24 percent plan to use that money to pay off debt.
Other findings from the NRF show that only 22 percent of respondents will spend their 2018 refunds on everyday expenses, the second-lowest level in survey history after last year’s 21 percent.
“Younger consumers are being more mindful about their hard-earned money, especially those 18-24 who have already filed their taxes this year, higher than any other age group,” Prosper Executive Vice President of Strategy Phil Rist said in the news release. “Although this group is focused on allocating a portion of their refunds to savings, they are also more likely to use them for everyday expenses compared with any other age group.”
Read more on the survey results here.
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