Johnny Monroe
February 27, 2023
• 4 Minute Read
Congratulations, you made it through another tax season! It's always a relief to file your taxes and wait for that much-needed tax return. But before you start planning that lavish vacation or buying a new gadget, let's talk about the Earned Income Tax Credit (EITC) and the smartest ways to spend your tax return.
What is an Earned Income Tax Credit?
The Earned Income Tax Credit (EITC) is a refundable tax credit for low to moderate-income individuals and families. It is designed to help offset the burden of Social Security taxes and provide a financial boost to those who need it most.
To qualify for the EITC, you must have earned income, be a U.S. citizen or resident alien, and meet specific income requirements. The credit amount varies depending on your income level, filing status, and the number of qualifying children you have.
The EITC is an excellent way to maximize your tax return and help you get ahead financially. If you're eligible, make sure to claim the credit when you file your taxes.
Top 3 financially smart ways to spend your tax return:
1. Rebuild your credit score with a secured credit card.
Your credit score is an essential factor in your financial life. It affects everything from your ability to get a loan or credit card to the interest rates you'll pay. If you have a low credit score or no credit history, using a secured credit card can help you rebuild your credit.
A secured credit card works like a regular credit card, but you'll need to make a deposit to open the account. The deposit serves as collateral, and your credit limit is typically equal to the amount of your deposit. By making on-time payments and keeping your balance low, you can improve your credit score over time.
Here are three of our top secured cards:
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- Annual Fee
- $0
- Minimum Deposit
- $49, $99 or $200
- Regular APR
- 29.99% (Variable)
- Fraud Coverage
- $0 Fraud Liability for unauthorized charges
- Balance Transfer Fee
- Balance Transfer Fee applies to balances transferred at a promotional rate
- Foreign Trans Fee
- None
Highlights
- No annual or hidden fees. See if you're approved in seconds
- Building your credit? Using the Capital One Platinum Secured card responsibly could help
- Put down a refundable security deposit starting at $49 to get a $200 initial credit line
- You could earn back your security deposit as a statement credit when you use your card responsibly, like making payments on time
- Be automatically considered for a higher credit line in as little as 6 months with no additional deposit needed
- Enjoy peace of mind with $0 Fraud Liability so that you won't be responsible for unauthorized charges
- Monitor your credit score with CreditWise from Capital One. It's free for everyone
- Get access to your account 24 hours a day, 7 days a week with online banking to access your account from your desktop or smartphone, with Capital One's mobile app
Rates & Fees
- Credit Recommended:
- Poor/Limited/No Credit
- Rewards Rate
- 1% Cash Back on payments
- Annual Fee
- $39.00
- Regular APR
- 19.24% (V)
- Cash Advance APR
- 25.24% (V)
- Credit Line
- Minimum refundable deposit of $200.00 up to $2,000.00*
- Credit Recommended
- Poor/Limited/No Credit
Highlights
- Earn 1% Cash Back Rewards on payments made to your First Latitude Secured credit card account.
- Past credit issues shouldn’t prevent you from getting a credit card with great benefits & rewards!
- Choose your own fully-refundable credit line - $200 to $2000 – based on your security deposit.
- Build or rebuild your credit!¹
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- Reports to all 3 credit bureaus
- No minimum credit score required for approval!
- ¹Cardholders who keep their balance low and pay their credit card bill on time every month typically do see an increase in their credit score.
- *See Important Disclosures for complete offer details
Rates & Fees
- Credit Recommended:
- Poor/Fair/Limited/Damaged
- Regular APR
- 9.99% Fixed
- Annual Fee
- $48
- Credit Line
- $200 - $1,000
- Credit Recommended
- Poor/Fair/Limited/Damaged
- Brand Name
- Visa®
- Security Deposit
- $200 - $1,000
Highlights
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- Absolutely No Credit Check or Minimum Credit Score Required
- Automatic Reporting to All Three National Credit Bureaus
- 9.99% Low Fixed APR - Your Rate Won’t Go Up Even if You Are Late
- Activate Today with a $200 Minimum Deposit - Maximum $1,000.
- Increase Your Credit Limit up to $5,000 by Adding Additional Deposits Anytime
2. Create an emergency fund.
Unexpected expenses can wreak havoc on your finances, so having an emergency fund is crucial. An emergency fund is a savings account that you can tap into when you need it most, like a medical emergency or job loss.
Experts recommend having at least three to six months' worth of living expenses saved in your emergency fund. If you don't have an emergency fund, consider using your tax return to start one. Put the money in a high-yield savings account, and make sure it's easily accessible when you need it.
3. Pay off large debt.
If you have high-interest debt, like credit card balances or student loans, paying it off should be a top priority. High-interest debt can quickly spiral out of control, making it harder to get ahead financially.
Using your tax return to pay off debt can save you money in the long run by reducing the amount of interest you'll pay over time. Make a plan to pay off your debt strategically, focusing on the highest interest rates first.
Your tax return can be a great way to improve your financial situation, but it's essential to use the money wisely. Rebuilding your credit, creating an emergency fund, and paying off debt are three of the smartest ways to spend your tax return. By taking these steps, you can get ahead financially and set yourself up for a more secure future.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.