Tax Refund Coming Your Way? These 3 Strategies Can Turn It Into Something Bigger

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3 Smart and Safe Strategies for Boosting Your Refund

This tax season, tens of millions of Americans could find they are owed a substantial tax refund. As of the week ending March 21, the average refund issued so far is $3,221. That’s a hefty chunk of change you can put to good use.

But if you’re lucky enough to not urgently need the cash right away, you can take advantage of today’s stellar interest rates to turn that refund into a more sizable sum—allowing you to do even more with it in the future.

Three safe, easy options for boosting your refund are:

1. A top-paying high-yield savings account
2. A nation-leading money market account (MMA)
3. A top nationwide certificate of deposit (CD)

We explain each of these options below, including how much each one can stretch various refund amounts.

Strategy #1: Grow Your Refund With a High-Yield Savings Account

One of the simplest ways to earn a great return on your cash is to put it into one of the country’s best high-yield savings accounts. We rank the highest-paying options every business day, and the top rate is currently 4.60% APY, with 14 additional options paying 4.35% or better. Compare that to big banks that pay virtually zero, or even the national average of just 0.41%.

Savings accounts let you deposit and withdraw at will, so you won’t have to commit your funds for any particular duration. You can leave your money there for months, a year, or even longer. Or, if you need some of the cash, you are generally free to withdraw what you need whenever you like, although some banks do impose fees or certain limits on withdrawals.

So, how much can you earn? Since savings account rates can change at any time, we can only estimate your future earnings. But assuming the top savings account rate of 4.60% going forward, we lay out below how much you’d earn with different refund amounts over various timeframes.

Strategy #2: Add Check-Writing With a Top Money Market Account

Money market accounts act very much like savings accounts, except they add the ability to write paper checks. If this feature is useful to you, choose a money market account over a standard savings account. But if not, feel free to choose whichever product currently pays a better rate or offers additional features you value.

Right now, the best nationwide money market account pays 4.40%, making it an excellent choice. For more options, see our daily ranking of the best money market accounts, with almost a dozen more options to earn at least 4.00% APY.

The amount you earn from the best money market account will be a bit lower than the amounts shown in the savings account table above, given today’s slightly lower MMA rates.

Strategy #3: Lock In a Guaranteed Return With a CD

Perhaps you won’t need your refund money—or at least some of it—for a while. If you can commit to parking your money in an account for several months, a year, or even longer, you stand to earn more with a certificate of deposit (CD). That’s because, unlike savings and money market accounts, CDs offer a fixed and guaranteed annual percentage yield (APY) that’s yours to keep until its maturity date.

Right now, interest rates are high. So, locking in a top CD soon will guarantee one of today’s elevated rates far down the road. You can always shop for the top rates with our daily ranking of the best nationwide CDs. The leading APYs across terms currently range in the mid-4% range.

Just be sure to choose your CD term carefully, as you’ll most likely be hit with an early withdrawal penalty if you withdraw the CD funds before maturity. By choosing a CD term you’re confident you can live with, you’ll protect your earnings from any penalty.

To see how much you can earn by saving all or some of your refund in a CD, review our calculation table below.

Where Are Interest Rates Headed in 2025?

It’s generally expected that the Federal Reserve will push rates modestly lower this year beyond the three rate cuts it already made in September, November, and December 2024. The target rate currently sits at 4.25%–4.50%. However, the timing and pace of 2025 rate cuts are highly uncertain right now due to unknown impacts from policies implemented by the new Trump administration.

According to the CME Group’s FedWatch Tool at the time of this writing, financial markets are predicting the Fed’s first 2025 rate reduction will be announced after the central bank’s June 17–18 meeting. And by year’s end, a majority of interest rate traders expect we’ll have seen three rate cuts, for a 0.75-point reduction—down to 3.50%–3.75%.

Any Fed rate cut will push savings, money market, and CD rates lower. So before the Fed reduces rates, it’s smart to snag one of today’s high APYs while you still can.

How We Find the Best Savings and CD Rates

Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account’s minimum initial deposit must not exceed $25,000. It also cannot specify a maximum deposit amount that’s below $5,000.

Banks must be available in at least 40 states to qualify as nationally available. And while some credit unions require you to donate to a specific charity or association to become a member if you don’t meet other eligibility criteria (e.g., you don’t live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.