Breaking the Cycle of Debt, Part II: Why You Shouldn’t Rely on Your Tax Return to Bail You Out of Holiday Debt


Now that the holiday season is over and the new year is upon us, it can be a time of reflecting on the past and planning for the future. However, if you’re one of the millions of Americans who incurred significant credit card debt from holiday shopping this season, you might not be so jolly anymore. In fact, a majority of people don’t stick to their holiday shopping budgets each year, and mistakenly fall into debt which can ruin their credit.  

At Quality Credit Repair, we’re not just the premier credit counseling services in Philadelphia, helping our clients consolidate and effectively manage their debt. We’re also the trusted resource of information for all things credit and debt related. Although you may think your tax return can bail you out of your holiday debt, you might want to reconsider.

Here’s why you should think twice before relying on your tax refund to pay off your credit card debt:


You Might Sink Further Into Debt

Preparing your tax return properly and correctly takes time. And all this time, your debt is actually growing. That’s right; as you wait for your tax money to be deposited in your account, or sent to your home, you’re sinking further into debt because of the interest you’re accruing on it. By the time you receive your refund, it may not be enough to cover—or even put a dent in—your holiday credit card debt. And as your debt increases, it can cause your credit score to plummet.


You Could Cheat Yourself Out of Credits

If you do try to get your tax refund quickly, other mistakes can be made. In fact, it’s common for taxpayers who are in a rush to get their returns to speed through the process. This can sometimes include relying on unskilled or even unsavory tax preparers and services. However, you should never underestimate the value of having a trusted professional do your taxes. They can not only recommend deductions and credits you might be missing, but could even yield you bigger tax savings, long-term.


What You Can Do About Your Holiday Debt

While it’s not a bad idea to earmark part—or all—of your tax refund for paying off your credit card bills, there are other, more reliable steps you can take right now to break the cycle of holiday debt. Consider setting up a budget for the first three months of the new year, including how much money is coming in from salaries, investments, and other income. Then, determine what you need for non-negotiable expenses, like mortgage, bills, food, etc.

Whatever leftover money should go directly towards paying down your credit cards. Try to ignore the minimum balances listed on your credit card bills. Only paying that amount will leave you in debt—likely until next holiday season.


Let Us Help!

This cycle of credit card debt and bad credit is a vicious one that can be overwhelming and difficult to break free of. And that’s precisely why we’re here to help. At Quality Credit Repair, we feature trusted debt management services so you can get back on your feet and enjoy the peace of mind that comes with being debt-free.

For more information on how we can help you overcome your debt and raise your credit score, call the top credit counseling agency serving Bucks County, PA at 215-613-8130 today!