Tax returns 'should be used to pay down credit cards'

There are better ways for Aussies to use their tax return than to spend it on clothes.

Rob Nicholls, acting chief executive for Credit Union Australia (CUA), claims that although people may be tempted to put this cash towards a "must have" pair of shoes or jeans, it would be much more effective if it was used to pay down credit card debts.

"It's amazing how peacefully you will sleep when you don't have a $5,000 credit card debt hanging over your head," he claims.

By doing so, the CUA executive claims people may be able to free up their finances quicker giving them more money for non-essential spending further down the line.

He also suggests that Aussies should look to take advantage of the high rates of interest currently attached to cash management or online savings accounts as they can be an effective means of saving for future.

Meanwhile, a recent study by the Australian National Retailers Association revealed 23 per cent of Aussies plan on using the cash they receive in the latest financial stimulus package to pay down debts.

Written by Emma North.