Tax time resolutions can help get your financial house in order

By Jeremy M. Simon

After looking back at their financial behavior during the past year and realizing they can do better, some consumers will make tax time resolutions. While tax time resolutions can fall by the wayside just like New Year's resolutions often do, you should commit to getting your financial house in order. 

When it comes to credit cards, a tax refund check can go toward paying off your existing debt.  Also, consumers may use a balance transfer credit card to shift their debt to a card offering a lower interest rate. 

However, financial experts say that it is better to leave the old credit card accounts open rather than closing them afterward, since part of your credit score is based on the overall amount of credit you have access to compared with how much credit you are using.

Separately, consumers who have been good about making payments may simply call up their credit card issuer to request a lower interest rate, or to have late fees and penalty charges removed from a bill. Since it costs the credit card issuer to find new customers, it is in their best interest to keep you satisfied. The money saved on interest charges and fees should then go to reducing or paying off existing credit card debt.

If you suffer from is having too many bills due at the same time, financial experts say it may be worth requesting a change on the due date.  

Meanwhile, some consumers may decide to refinance their home. Even though consumers who choose to refinance will probably have a higher mortgage and interest rate, the rate will still be lower than the APR on their credit card. Additionally, mortgage interest is tax deductible, while credit card interest is not.

But this strategy is not for everyone. Financial advisers say that the two types of consumers who should consider refinancing are those that got into debt due to unforeseen life events (like losing their job or suffering from an illness) and those consumers who have resolved whatever issue initially threw them into debt.

Another "financial resolution" for lowering debt that is faster and cheaper than refinancing a house is refinancing a car loan. If a consumer's credit rating has improved, the reward could be a lower monthly car payment. Those savings can then be applied to paying down credit card debt or other debt.

By tackling debt and getting a better grip on expenditures, consumers will feel a sense of accomplishment when they review their financial behavior next tax season.    

Published: May 14, 2007

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