Putting this year's tax return in your savings account seems like a no-brainer right? Well, with the average savings account offering up a return of just 1.79% p.a., Mozo research has shown there are some much better options for money savvy Aussies.
“We found depositing the average tax refund of $2,602 in a savings account with this 1.79% rate delivers a return of just $48 in interest a year- not much better than if you were to put it under your mattress,” said Mozo Data Manager, Peter Marshall.
So what should you do with your tax return windfall? We’ve broken down a couple of the best ways to use your tax return so you can watch your hard-earned money grow this year.
Make an extra repayment on your home loan
One way Aussies can save is by putting their tax refund towards their mortgage. By funnelling your tax refund into your mortgage you could save $230 in interest over the next year*. Over a 30 year loan, this would wind up saving you $6,895 in interest.
“Nearly one million Australian mortgage holders are now experiencing mortgage stress across the country,” said Marshall^.
“Using your tax refund as an extra repayment is a great strategy to build up a bit of a buffer within your mortgage when interest rates inevitably rise.”
Pay off credit card debt
With ASIC findings suggesting that as many as one in five Aussie cardholders are struggling with credit card debt, paying off a lingering balance with your tax return could be a way to get out of deep water.
Using your tax refund to pay the average credit card debt of $4,400 off a card collecting interest at 17.06%* could save you up to $344 over the year, helping you clear your card debt up to seven months earlier.
“For debt-holders receiving a tax refund this year, this could be the kick start they need to finally get their finances from the red into the black,” said Marshall.
If you’re tired of high interest rates and accumulating debt, check out some great deals to help you save below. Or, if you’d like to compare more options, head over to our credit card comparison tool.
*Calculations based on the average tax refund from the Australian Taxation Office Annual Report 2016/17. Annual credit card savings calculated are based on the average purchase rate of 17.06% and average credit card debt. Annual home loan repayment savings are based on an average $300,000, owner-occupier home loan. ^From Digital Finance Analytics: https://digitalfinanceanalytics...