ROCHESTER, N.Y. – This Consumer Alert takes a look at next month’s big day. And no, I’m not talking about the eclipse. I’m talking about Tax Day. We heard lots of complaints from viewers last year who said their refunds were much smaller. But this year, I have a bit of good news. As of February 16, the IRS said the average tax refund is $3,207. That’s 2.1 percent higher than the average refund last year.

Folks were so upset about refunds last year because all those pandemic-era tax breaks expired. We saw refunds that were on average three percent less than the year before. But now the IRS has adjusted many of its provisions for inflation. That has pushed the standard deduction and tax brackets seven percent higher. That’s the good news.

Here’s the bad news. In a LendingTree survey, of those folks who said they are relying on their refund, the primary reason they gave was to pay down debt.

“And the reason for that, if you haven’t noticed, is that inflation has been pretty hot for a while,” said Jacob Channel, LendingTree’s senior economist. “And the rate at which it is increasing is decreasing. It’s certainly getting better; it’s certainly better than it was in 2022 or say even the start of last year. But it remains hot, and as a result people are spending more money just to make ends meet. and unfortunately, people are also borrowing more money just to make ends meet.”

If you’re in debt and paying high interest rates on that debt, paying that off should be your priority. But the second most common response in the survey was saving the money. That’s a great plan. But where you save matters. Most big banks like JP Morgan Chase and Bank of America offer a savings account with a yield of .01 percent which is no better than sticking your cash under your mattress.

Today, high yield savings accounts are offering an annual percentage yield as high as 5.2 percent. Here’s an example of the difference that can make. Let’s say you put your $2,000 tax refund in a high yield savings account. If you contributed just $25 a month into an account with an annual percentage yield of 5.25 percent, in two years you’d earn $252.09 in interest for a total of $2,852.09. Compare that to the interest you’d earn at most big banks during the same time period, a whopping 46 cents.

If you need the money in an emergency, by law you can transfer money out of a high yield savings account up to six times during a month without paying any fees. But read the fine print. Some high yield accounts require you to wait days before you can get your cash. 

Click here for LendingTree’s recommendations for high yield savings accounts.

Click here for Bankrate’s recommendations for high yield savings accounts.

Click here for Nerd Wallet’s recommendations for high yield savings accounts.

Click here for Investopedia’s recommendation for high yield savings accounts.

Click here for Forbes recommendations for high yield savings accounts.

I like to compare lists and look for accounts that appear on multiple lists, then pick the product that best fits your needs.