Millennials have a bad reputation. Many members of older generations think of them as lazy, entitled, and spoiled. Based on that characterization there are all sorts of jokes you can make as to how members of the younger generation might plan to spend their tax refund.

So, if you're a Baby Boomer, a member of the Greatest Generation, or even in Generation X, you might be shocked to learn that millennials won't be spending their tax refunds on participation trophies. They also won't, at least for the most part, be spending their refunds on selfie sticks or on bottles of Sriracha.

Instead, over 40% of millennials have a sensible plan for a windfall that averaged $2,782 across all Americans getting refunds last year. Of course, not every filer will get that much (some even owe) but the 43% of millennials who get a refund will be using it to pay down bills they accrued over the holidays, according to a survey from tax preparation company Jackson Hewitt.

That's actually a higher rate of using a tax refund to pay down holiday debt than the 31% of the general population polled who gave the same answer to the question "Do you tend to use your tax refund to pay off holiday debt/bills/credit cards?"

A young woman holds a smartphone and shopping bags.

Overspending during the holidays can lead to financial problems. Image source: Getty Images.

Why is this important?

Paying off debt, specifically credit card debt, is generally the top thing any person can do to improve their financial health. In most cases (really aside from borrowing money via a payday loan or other similar borrowing methods) credit card debt is the most expensive debt a normal household carries.

In addition, while overspending during the holidays is a whole separate problem, retiring that debt quickly should be a priority. If you file your return quickly (before Jan. 29) you can get your refund electronically by Feb. 13. Of course, the later your file, the farther back your refund gets pushed on the calendar, but if you act early you can pay off holiday debt before too many months have gone by. 

The benefits of paying off credit card debt

In addition to being the most cost-effective debt to pay off in most cases, there are other benefits to paying down credit card debt. A major one is that having less debt and more available credit raises your credit score. In general, you want to keep your credit utilization ratio below 30%. That means you should have more than 70% of your total allotment of credit across all cards available to use.

This isn't a small thing, your credit utilization ratio counts for 30% of your overall score and it's the only factor you can change quickly. Using a refund to pay down credit card debt can result in a higher credit score which may mean you pay lower rates to borrow money or get approved for a loan you otherwise may not have.

Whether you are a millennial or a member of another generation, using a tax refund to pay off high-interest credit card debt is a sound financial strategy. It may not be as fun or socially conscious as some things you could do with the money, but creating a sound financial base for yourself makes a lot of other things more possible going forward.