Key Takeaways
- A recent survey by tax software company TaxSlayer found that almost 80% of current U.S. taxpayers expect to receive a refund this year.
- The most popular use of those funds is to pay for necessary expenses like rent, utilities, and groceries, though many respondents said they would also use their refund to pay down credit card debt.
- The fourth most common response was putting all of the refund into a savings account, cited by 1 in 6 respondents.
- Stashing cash in a high-yield savings account is smart right now, as rates are near historic highs. Our ranking of the best high-yield savings accounts offers 15-plus options paying 4.40% to 4.75%.
- If you can live without your cash for a while, CDs have the advantage of guaranteeing your rate for the full CD term. Today’s top rates range from 4.35% to 4.75% on terms of 6 months to 5 years.
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1 in 6 Plan to Put Their Whole Refund Into Savings
With tax season upon us, many Americans are motivated to get their tax return filed as soon as they can—so they can receive their expected refund as soon as possible. According to a recent survey by tax software company TaxSlayer, almost 8 in 10 respondents expect to receive a refund this year.
But where will they spend it? In a December 2024 survey of 2,000 U.S. taxpayers conducted for TaxSlayer by Talker Research, 40% of the respondents said they would put at least some of their refund toward necessary bills, such as rent and utilities. Along similar lines, about a third said they would spend refund money on groceries and household supplies.
Slightly more than a quarter reported they would use their refund for debt reduction, specifically paying down credit card debt, while less than 5% indicated they would put refund money toward a student loan.
In fourth place was savings, with 17% of respondents saying they would deposit their whole refund into a savings account. It’s possible other respondents plan to bank at least part of their refund in savings.
“The survey shows, most people are relying on their tax refunds to cover essentials today instead of setting money aside and saving for the future, which may simply reflect unique financial pressures this year,” said TaxSlayer’s Head of Consumer Product Seth Babb.
Fifteen percent of the respondents cited home repairs and improvements as ways they expected to use their refunds. That’s the same percentage who said they would just leave their refund in their checking account for miscellaneous spending.
Only 8% of the survey respondents said they would use their refund for luxuries, which included survey choices of new clothes, entertainment, a new phone, gifts for others, and a night out on the town.
It’s a Great Time to Sock Money Away in a Savings Account or CD
For anyone who can afford to save at least part of their tax refund rather than spend it, times are good for earning a solid return on that cash. Thanks to the Federal Reserve’s aggressive rate-hike campaign in 2022–2023, what you can earn on your money in the bank is historically very high right now.
Two excellent options are a top high-yield savings account or a certificate of deposit (CD). The best nationwide savings account currently pays 4.75% APY, letting you deposit and withdraw funds as you like. Our daily ranking of the best high-yield savings accounts will also give you more than a dozen additional options to earn 4.40% or more.
But since savings account rates can be lowered at any time, you may prefer to guarantee your return with one of today’s top-paying CDs. The leading rate across all CD terms is also 4.75% APY right now, available for an 8-month period. Top rates of 4.35% to 4.60% are available for longer terms, lasting from 1 year to 5 years. Just be sure to choose your CD term carefully, as you’ll most likely be hit with an early withdrawal penalty if you cash out early.
Daily Rankings of the Best CDs and Savings Accounts
Note that the “top rates” quoted here are the highest nationally available rates Investopedia has identified in its daily rate research on hundreds of banks and credit unions. This is much different than the national average, which includes all banks offering a CD with that term, including many large banks that pay a pittance in interest. Thus, the national averages are always quite low, while the top rates you can unearth by shopping around are often 5, 10, or even 15 times higher.
How We Find the Best Savings and CD Rates
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.
Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.