Smart uses for your tax refund

Each year, roughly 70 percent of Americans get an income tax refund. Thanks to the Economic Stimulus Act of 2008, beginning in early May most also will receive an additional tax rebate check of up to $600 (up to $1,200 for joint filers) - even those who don't earn enough to owe federal income tax.

A survey commissioned by Visa Inc. found that roughly the same number of people plan to use their tax refund to pay bills (43 percent) as to contribute to savings (45 percent). Others said they'll use it to make a major purchase (9 percent) or pay their rent or mortgage (3 percent).

Although the money may be burning a hole in your pocket, here are a few possibilities to consider before rushing off to the mall:

Spend wisely. If you want to reinvest part of your refund/rebate back into the economy, consider spending it on necessities that will save you money in the long run. For example, servicing your car helps it run more efficiently and last longer. And weatherproofing your house or buying energy-efficient appliances can significantly lower utility bills.

Pay off debt. When you carry forward credit card balances, interest charges can really add up over time. For example, making only the minimum monthly payment (assuming 4 percent) on a $1,000 balance could add seven years until payoff and more than $500 in additional interest for a card with 18 percent interest - assuming you don't make any new purchases.

Save for emergencies. It's wise to set aside three to six months of living expenses to cover job loss, unexpected medical expenses or other unplanned events. With interest rates dropping, shop for deals on high-yield money market savings accounts or short-term CDs at www.bankrate.com.

Save for retirement. The longer you delay, the harder it is to catch up on retirement savings. Open or add to an existing Individual Retirement Account or 401(k) plan. Practical Money Skills for Life, Visa's free personal financial management site, contains detailed retirement financial planning information, including tax ramifications and interactive retirement savings calculators (www.practicalmoneyskills.com/learn/life_events/retirement).

Finance education. Strengthen your career prospects and earnings potential by adding new skills through college courses or vocational training. Ask if your employer will kick in for job-related education.

You can also set money aside for your children's or grandchildren's education - while saving on taxes - using a 529 Qualified State Tuition Plan or Coverdell Education Savings Account. The U.S. Securities and Exchange Commission's website provides information on 529 plans (www.sec.gov/investor/pubs/intro529.htm) and the IRS's site explains Coverdell accounts (www.irs.gov/taxtopics/tc310.html).

Fund your vacation. Set money aside now so you won't need to rack up debt while on vacation.

Give to charity. Don't wait until year's end to make charitable contributions - a time when holiday expenses compete for available dollars. Try making part of your donations using tax refund money.

Don't overpay taxes. By getting a large tax refund, you're essentially giving the government an interest-free loan throughout the year. Ask your employer's benefits department for a new W-4 form and recalculate how much is being deducted each pay period. Your goal should be to receive little or no refund. Consult a financial professional about your particular situation; if you don't know one, www.plannersearch.org is a good place to start your search.

Sure, it's tempting to blow your whole tax refund on the latest gadget, but try to invest most of it in your long-term future financial security.