b. Why you should use your refund to pay down debt



c. Tips on how to go about paying off debt (35% of taxpayers surveyed will pay down their debt)

Tax time is just about here. For some of us that invokes a sinking feeling, for others it sparks a sense of anticipation and the burning question: what will you do with your tax refund?

Here's a novel idea: how about using it to improve your credit?

You can and it's very simple. You just have to come to grips with a few things first.

For starters, the average American carries an incredible $8,400 in credit card debt. When you consider that the interest rates on this debt can be as high as 30%, this is a very expensive statistic.

If you are one of these average Americans carrying too much debt right now, using your tax refund is a smart and easy way to pay it down. And the best part is, reducing your debt can boost your credit, improve your interest rate offers and save you a lot of money in interest charges. Sure, that might not be as fun and exciting as a spontaneous long weekend in the Caribbean, but when you think of the long-term value of reducing debt and improving your credit, well, sacrificing your fun in the sun today may help you afford a lot more vacations in the future.

Here are a couple of quick pointers on how you can start paying down and reducing some of your debt, too:

Pay off your debt rather than moving it around

The most effective way to improve your credit in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may actually lower your score.

Make more than your minimum

First, break the habit of only paying the minimum. Paying only the minimum and only a fraction of the interest is exactly what the banks want you to do. The longer you take to repay the charges, the more interest they make, and the less cash you have in your pocket. Pay as much as you can afford each month.

Target your debt payments

Consider starting off by paying the most you can toward the credit card with the highest interest rate. Pay it off as quickly as possible. Then move on to the card whose interest rate is almost as high, and so on, until you have paid them all off as quickly as possible.

If you must, turn to your savings account

Ok, this is a last resort. No one wants to dip into or deplete their hard-earned savings, but if you're using it to pay off an 18% APR credit card, it's essentially the same as getting that 18% return without any risk on your part. The higher the interest rate on your debt, the more attractive repayment versus savings becomes.

Renegotiate terms with your creditors

Many creditors are willing to do this. All you have to do is ask. You have nothing to lose and in many cases you can shave 3, 4 or even 5 percent off your APR, and you'll pay down your debt faster.