Except that my credit card balance is rarely above $100 or so due to incidentals, groceries, and gas… I think some are missing a big point here. We can all craft an Excel spreadsheet showing exactly how much interest could be saved or made by not getting a refund. In practice, despite opportunities to pick up a few dollars here and there, you have to do -what works for you-. I’m disciplined with my finances— I set aside a large percentage right off the top to 401K/IRAs, and then take another slug of after tax income for a general savings account. What I’m left with in my checking account is just enough to pay the bills. Granted, if I reduced my withholding I could direct those extra dollars to the savings account. But, the dollars are then accessible with just a click online for “little” impulse purchases. When I get one large check (and trust me, it’s not THAT big!) in the form of a refund, not a penny gets wasted. Every year, these dollars go to some specific cause (car, home improvement, investing/PA, vacation, whatever.). So in the end, I do -what works for me-. I’m disciplined with money and frugal, but I know I’m human and prone to frittering away a little money during the year. The tiny interest earned would not offset the bit of mindless spending I would do, so I choose the refund.
Here are two right off the top, plenty of others out there if you are willing to look and jump through a few hoops (which in this environment I am to have liquid riskless assets earning these sorts of return). http://www.ecountybank.com/personal/checking/kasasa-cash.html http://www.bankofthesierra.com/personal/checking/sierra-reward-checking.html
Those accounts are essentially reward credit cards - the balance is capped at $25K (which, you may be surprised to learn, is an issue for some of us) and it functionally has to be your main checking account. I can early close to that (with significantly fewer restrictions) by running all my expenses through a rewards credit card and paying off the balance each month.
NakedPuts Wrote: ------------------------------------------------------- > Those accounts are essentially reward credit cards > - the balance is capped at $25K (which, you may be > surprised to learn, is an issue for some of us) > and it functionally has to be your main checking > account. I can early close to that (with > significantly fewer restrictions) by running all > my expenses through a rewards credit card and > paying off the balance each month. This. You can get some good rates on checking accounts through internet banks, but I’m too lazy. I still like to be able to walk into my bank if I want.
say an average 2500 tax return… @ 4% (which is very good) = 100$ take 28% right off of that = 78$ (bank interest is taxed w/ 1099 int) so lets see- this is not even counting the important point already brought up about the fact that the 2500 is over the course of the year- so earnings are overstated+ you’d have to make quarterly payments anyway so none of it would be collecting for an entire year… lets be generous and say its 45$ now how about opportunity cost? I’m saving min 4 hours of my life not worrying about taxes all year. Thats worth more than 45 bux to me!
@Naked: you find 3-4 of these and you can stock away between 25-50K in each one, so as much as 200K, if you are keeping that much cash you have other issues to worry about;)
adavydov7 Wrote: ------------------------------------------------------- > @Naked: you find 3-4 of these and you can stock > away between 25-50K in each one, so as much as > 200K, if you are keeping that much cash you have > other issues to worry about;) But then I have to run 8 debit card transactions per account per month, which actually would be an issue. I haul around enough cards as it is without keeping track of which one I’ve used enough times that month. I also prefer getting airline rewards because those have some non-monetary benefits like status upgrades (which leads to flight upgrades), lounge access, etc.
used average rebate figure from OP 
I wish! I have no deductions- no kids, no st income tax to deduct and others don’t reach minimum… its quite depressing. You however should have that money in a tax shelter. I get >6% on insured muni funds- thats over 8% on a tax equivalent basis @ 28%. Yeah- its got mkt risk (can hedge if you know what you are doing), but 200k in straight up cash? eeks
@Naked: i have a process for that so I don’t have to do any of that crap myself (automatic debit transactions for 1 penny each). @akanska: oh I don’t keep nearly that much money on hand, ever. I was just making a point for the rich on here that said 25K just doesn’t cut it. I do keep some cash, and always will for what I deem great buying opportunities. Hence, its not so much the riskless aspect that particularly appeals to me but rather the liquidity of my assets:) But to each his own, right.