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A Third of Americans Plan to Spend All or Part of Their Tax Refund, Finds Capital One Bank Survey

Everyday Expenses Top Big Purchases, Vacations, Clothing and Electronics as Spending Priorities

MCLEAN, Va.--(BUSINESS WIRE)--Mar. 20, 2012-- This year’s April 17th tax filing deadline is fast approaching and, according to the latest IRS statistics, the average federal tax refund will be $2,913. For the second year in a row, Capital One Bank’s annual Taxes and Savings Survey found that a third (33 percent) of Americans plan to spend all or part of their refund.

Still, many Americans are using their refunds to save or pay down debt, with one of every four (27 percent) saying they plan to save at least part of the money they get back from Uncle Sam, 17 percent planning to pay down debt and 5 percent investing their refunds. However, almost seven in ten (69%) Americans do not calculate their tax refund or tax payment into their annual budget.

“Most people are not factoring their annual return into their overall financial plan and long-term objectives,” said Mickey Konson, Managing Vice President for Retail Banking at Capital One Bank. “A tax refund is often seen as free money, which makes it very tempting to spend it right away, but it’s important to remember that the refund you’re getting back is your own money. Tax season is a good opportunity for people to plan ahead, with an eye toward their future goals and financial health.”

More than half (58 percent) of respondents said that the current economic climate will not impact their refund plans. For those planning to spend all or part of their returns, everyday expenses topped the list of shopping priorities:

  • Everyday expenses (28 percent);
  • Major purchases (e.g. autos, appliances, etc.) (9 percent);
  • Vacation (8 percent);
  • New clothing and accessories (6 percent); or
  • Electronics (e.g. iPad, TV, smartphone, etc.) (5 percent).

With the tax deadline quickly approaching, only 11 percent of respondents said they are likely to wait until the last minute to file their tax return and take advantage of the late filing deadline. Among the late filers, men make up the majority at 61 percent.

Of those consumers who will owe taxes this year, 32 percent say they will need to dip into their personal savings to cover the cost. One quarter (25 percent) has set aside savings specifically for taxes and 19 percent will do an installment agreement or payment plan with the IRS.

Capital One Bank offers the following tips for consumers considering how they can boost their savings, whether saving their tax refund or planning to set aside taxes they might owe for next year:

      1.  

Start saving ASAP – In the fluctuating economy it can be challenging to think about saving money, but the adage “the sooner the better” certainly applies when it comes to saving, and it’s never too early or late to start. The sooner you start saving the more interest you can earn.

 
2.

Look for a product with a strong rate – When reviewing your savings options choose the product with the best rate of return that matches your lifestyle and needs. Some checking accounts are offering higher interest rates than even CD accounts, giving more flexibility and access to your funds than a CD would. Capital One Bank’s High Yield Free Checking account earns an interest rate that is five times the national average. The rate is guaranteed for one year.

 
3.

Save regularly by setting up automatic transfers – Don’t stop contributing to your savings after getting your refund. While it can be difficult, it’s always a good idea to get into a routine of putting aside money. One of the easiest ways is to have funds automatically moved to your account every month or with every paycheck. This is particularly important if you need to set aside savings at the end of the year for taxes.

 
4.

Avoid unnecessary fees – When choosing a savings product, make sure that you’re not losing your hard-earned cash to fees. Look for a product that offers no recurring monthly fees.

 
5.

Make sure your money is safe – Make sure any savings tool you use is FDIC-insured.

A final tip is to save in preparing your taxes. Capital One customers get a 35 percent discount on TurboTax® Online Federal products. TurboTax gives step-by-step guidance and free one-on-one tax advice from an experienced tax professional, via phone or chat. Details are on the TurboTax-Capital One website.

Survey Methodology

The findings reported in this release are from telephone surveys conducted by the opinion research firm, Braun Research of Princeton, NJ. The survey was sponsored by Capital One Financial. Braun Research completed 1,025 landline and cell phone interviews with US resident adults age 18 and over. All interviews were with one household member only selected at random. The interviews were conducted from February 23, 2012 through February 28, 2012. The margin of error for the national sample is ± 3.1 percentage points at the 95 percent confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national probability sample. All interviews were conducted using a computer assisted telephone interviewing system. Landline interviews were conducted with normal dialing processes and cell phone interviews were dialed by hand in compliance with state and federal rules. Statistical weights were designed from the United States Census Bureau statistics.

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $128.2 billion in deposits and $206.0 billion in total assets outstanding as of December 31, 2011. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index. High Yield Free Checking is offered by Capital One, N.A., member FDIC.

Source: Capital One Financial Corporation

Capital One Financial Corporation
Amanda Landers
703-720-2478
amanda.landers@capitalone.com