More Than Half of Americans Plan to Spend Their Tax Refunds

More Than Half of Americans Plan to Spend Their Tax Refunds

As a quick follow-up to a recent Brief suggesting that reluctant spending will slow retail sales, a study by the Cambridge Consumer Credit Index points out some probable "cash" generators. The index reveals that 59 percent of all Americans expecting tax refunds this year plan to spend them on everyday purchases or to pay bills.

"The results of Cambridge Consumer Credit Index's April study indicate the economy should get a boost as most taxpayers spend their tax refunds. However, consumers are still cautious, as shown by the four percentage point increase in the number of Americans putting their refunds into savings accounts this year compared to 2002," says Jordan Goodman, spokesperson for the Index.

Of those surveyed, 27 percent plan to save their refunds in a bank account, while only 4 percent will invest the money in stocks, bonds or mutual funds. Two thirds of all American taxpayers are expecting to receive tax refunds this year. In April 2002, 69 percent received refunds and 62 percent spent the money on everyday bills, 23 percent saved it and 5 percent invested in stocks and bonds.

On the other side of the ledger, 21 percent of Americans will owe the Internal Revenue Service additional money when they file their tax returns. And, according to the Index, the percentage of Americans who feel they will not owe any taxes to the IRS this year is 13 percent. Up by three percentage points from last year's index.

In conjunction with the Index, Cambridge representatives asked respondents for the primary reason that they found it necessary to get help with their debts now.

- 30.2 percent are frustrated with high bank rates and fees

- 26.7 percent expect income reduced from a lower salary, less overtime or layoff

- 13.2 percent got into too much debt by overspending

- 11.7 percent want to improve ability to achieve future financial goals like buying a house or saving for retirement

- 6.7 percent lacked financial education to prevent too much debt

- 5.3 percent felt large medical expenses forced them to take on huge debts

"While consumers are being very restrained about their spending on credit now, the Cambridge Consumer Credit Index indicates that attitudes about using credit in the future are improving a bit, as both the next month and next six month indicators showed slight increases," says Jordan Goodman, spokesperson for the Index.

Find out more here.

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