How Should We Divide our Tax Return Towards Our Credit Cards? – Jacquie

Hello! My husband and I will be getting a good amount of money back from taxes and we are wondering what would be the best for bettering our credit, we have pretty low scores.

We have 5 credit cards with balances ranging from about $130-$700. We want to know if it would be better on our credit reports if we totally pay off a couple of them, or put money towards all of them and get it to a lower balance and then continue to make the monthly payments?

Or would it be better to put more money towards student loans and hospital bills from the birth of our son.

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

Thank you!!


Dear Jacquie,

The first thing that comes to mind is if you are getting a big chunk of change back it may be a strong indication you are overwithholding throughout the year when you need that money most to makes ends meet.

Consider changing your withholdings so you can get back closer to a break-even point at tax time. Let’s say you are expecting $3,600 back, by adjusting your withholdings you can put $300 a month back into your pocket when you need it most to pay down your debt.

Regarding how to best use the money you will be getting back, I’m afraid I need a bit more information. I’d like to know the balances on your current cards and their limits, the amount of the other debt you mentioned and how much you currently have in savings.

Please post your responses and follow-up messages to me on this in the comments section below.

Damon Day - Pro Debt Coach
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