Make the Most Out of Your Repayment Strategies During Tax Season

The 2024 tax season is well underway, with many Americans having already submitted their returns. As of March 8th, the IRS has processed over 62 million tax returns, issuing more than 43 million refunds, with the average refund standing at $3,145.

What are Americans planning to do with this influx of funds? Year over year, tax refunds often represent a household’s biggest annual injection of cash, surpassing a typical worker’s paycheck, and are often used to pay down debt or increase savings. In 2024, 19% of taxpayers state that they intend to allocate their refunds towards debt repayment.

67% of taxpayers are expecting refunds this year. This creates a window of opportunity for consumer finance organizations to engage their customers with repayment campaigns.

Repayment Strategy

Harness consumers’ heightened propensity to address debts during tax season by implementing targeted strategies to facilitate payments and recoup funds.

Utilizing Texting Campaigns

By implementing text campaigns, consumer finance organizations can effectively reach their customers within their preferred communication channel. 

  • Real-Time: Texting offer the advantage of real-time communication with consumers. Unlike emails or traditional mail, which may go unread for days, texts are typically read within minutes of being received. This immediacy can prompt quicker responses from consumers, especially when it comes to addressing outstanding debts.
  • Personalized and Targeted: Text campaigns allow for personalized and targeted messaging tailored to your consumer’s needs. Whether it’s a friendly reminder about an upcoming payment, a notification about available payment options, or a gentle nudge to address an outstanding balance using their tax refund, texts can be customized to resonate with individual consumers, increasing the effectiveness of collections efforts.
  • Compliant: It’s important for consumer finance organizations to ensure compliance with messaging regulations, such as the Telephone Consumer Protection Act (TCPA), when implementing texting campaigns. By partnering with a reputable texting provider that prioritizes compliance, organizations can mitigate risks and maintain consumer trust while maximizing the benefits of text-based communication this tax season.

Know Your Audience

A research survey by Bank Rate in January 2024 found that, by generation, Gen Z expects the 2nd largest percentage in tax returns this tax season, nearly surpassing their Millennial counter parts.

Americans Anticipating a Tax Refund – By Generation

      • Gen Z: 75%
      • Millennials: 76%
      • Gen X: 67%
      • Baby Boomers: 57%

As Gen Zers continue to age into banking and lending consumers, (with the youngest in their generation being 12 years of age in 2024) consumer finance organization should shift their communication strategies to align with this generation’s preference for real-time digital interactions.

Create Seamless Interactions

Remind customers of outstanding balances and provide simple methods for payments. Research shows that 95% of consumers with missed payments would have appreciated a payment reminder via text. Harness the power of texting this tax season by crafting payment reminder and repayment progress campaigns. 

  • Offer Flexible Payment Options: Make it easy for consumers to repay their debts or outstanding balances by providing various payment options. Incorporate links within text messages that direct recipients to their online portals where they can make payments conveniently. Or, offer TextPay so that consumers can authorize payments on their existing account directly within the text channel with a simple keyword command.
  • Recognize Milestones: Celebrate milestones in the repayment journey to motivate customers and reinforce positive behavior. For example, send congratulatory messages when a customer successfully pays off a portion of their debt or makes a series of consecutive on-time payments. This recognition fosters a sense of accomplishment and encourages continued progress towards total repayment.

“Let’s make your tax refund count! Your refund may be able to resolve your outstanding balance with ABC Loans. Reply ‘REFUND’ to learn more today. Reply STOP to opt out.”

“Hi Jane Doe! Did you receive a refund on your tax return this year? Your refund may be able to resolve your $1500.00 balance on acct **0001 with ABC Loans. Reply ‘LEARN MORE’ to view your payment options. Reply STOP to opt out.”

“Congratulations Jane Doe! Your recent payment of $525.00 on acct **0001 has made a big impact on reducing your outstanding balance. Keep up the great work! Reply ‘PROGRESS’ to view your remaining balance. Reply STOP to opt out.”

By recognizing consumers’ propensity to address their financial obligations during tax season, consumer finance organizations can successfully facilitate payments and maximize collections.

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