You could use your tax refund to pay off debt — but should you? 4 questions to ask yourself

Twenty-three percent of Americans are debt-free, leaving a large swath of the country saddled with credit card balances and student loan burdens, among other forms of debt, according to the Federal Reserve.

If you get a tax refund — or any unexpected cash infusion — you may think it’s a no-brainer to use some or all of that money to pay off debt. While there are many situations when that is the right move, there are several circumstances in which you should consider putting the money elsewhere before turning to debt.The decision depends on your financial situation and your type of debt.

Here are some questions to ask yourself before putting that extra cash toward debt and tools for taking next steps.

If you have high-interest debt — debt that has a rate higher than an average mortgage rate or federal student loan rates — you should prioritize paying that off with any extra cash you may have, certified public accountants previously told CNBC Select.

Otherwise, this debt will grow rapidly, and usually faster than inflation, so you end up paying more the longer it goes unpaid.

If you don’t have any high-interest debt, you should ask yourself additional questions before starting to pay your low-interest debt down with that tax refund.

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You may find an investment account that offers a higher yield than your debt rate,experts previously told CNBC Select. For example, the average stock market return is 10%, according to Experian. Say you have an account that earns that much each year. In that case, it may be worthwhile to put the money there instead of using it to pay off your debt, because low-interest debt typically has an interest rate below that 10% threshold.

In short, if your cash will earn more as an investment than you would save on interest, you may want to forgo using that cash to pay down debt.

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