NEW YORK (CNN/Money) – You may be in line for a bigger federal tax refund than you thought.

The IRS said Friday that so far this tax-filing season, the average refund is $2,292, a 4.5 percent increase over the average refund this time last year. And the total number of refunds being issued is up 4.1 percent.

Typically, early filers tend to have larger than usual refunds (otherwise, why rush the process?) and that can skew the national averages to the high side, but the increases aren't surprising. With the reduction in tax rates and the increases in the amounts of key credits and deductions in 2003, taxpayers are likely to pocket a little more cash this year.

TAX REFUND SAVINGS CALCULATOR   Refund amount:  $  Interest rate:    % Number of years:       RESULT: Your refund will grow to: $

In fact, it's very possible you inadvertently overpaid into the system for six months. That's because the new withholding tables reflecting the lower rates didn't go into effect until July, even though the changes were retroactive to Jan. 1, 2003.

That could leave you (and, with any luck, me) with a happy quandary: Where to put the refund cash?

Whether you view a refund as found money, enforced savings or just a reminder that you earned more than you actually netted last year, why not use it so that it pays real dividends over the long haul?

With that in mind, here are some smart -- and some fun -- options.

Give yourself a break. Surely there are better things to do with your time than tie yourself to your desk for life to pay what you owe. So, priority No. 1 should be to reduce high-rate loans or credit card balances.

Say you get a $3,000 refund and you've got a $10,000 credit card balance at 16.4 percent. If you normally pay $400 a month on that balance, it would take you 2 years and 7 months plus $2,114 in interest to pay it off.

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But if you knock $3,000 off your balance and continue to pay it down at the rate of $400 a month, you'll be debt-free in 1 year and 8 months and you'll only pay $930 in interest, saving yourself $1,184. So, in effect, that $3,000 refund is really worth $4,184 to you ($3,000 + $1,184 in saved interest).

Prepare for the unexpected. That sneaky $1,500 root canal or the little layoff you didn't see coming can really put a dent in your short-term savings, especially when you don't have any.

Treat your refund as potting soil that will bear fruit in the form of short-term financial stability. Put it in an interest-bearing savings or money market account -- or a very short-term CD -- so you can access it quickly if you need to.

Prepare for the expected. If debt is not your issue and your emergency fund's in place, then how's your 401(k) doing?

If you've not been maxing out because you were afraid you wouldn't have enough cash flow, well, "now you've got the cash flow," said enrolled agent and certified financial planner Barbara Steinmetz.

Once you bank the refund, you can bump up your pre-tax contributions. Doing so will boost your nest egg balance and get you a bigger income tax break in 2004.

If you don't have a 401(k) or you're already contributing the maximum allowed, that refund can do wonders as a deductible contribution to a traditional IRA or as a non-deductible contribution to Roth IRA that will grow tax-free. (To see if you're eligible for either, click here.)

Get your chi on. Your home is probably your biggest asset. Yet often, "people don't take care of the largest single investment they make," Steinmetz said.

When, she wonders, was the last time you got a termite inspection? And how long will it be before that spot of water damage in your ceiling spreads?

So, carpe diem on the home repairs and upkeep. Doing so will head off more expensive problems, help preserve the resale value of your home and, if you're a Feng Shui fan, improve the quality of your life by creating a habitat that's in good condition.

Live for next week. Getting married this year? A refund can help fund the honeymoon or the flowers. Buying a house in a few months? Two words: Down payment. Like to throw parties that always cost more than you expect? Start a social-animal fund.

Get some emotional bang for your buck. If you're still waiting to read the word "splurge," your patience will now be rewarded. Yes, you could splurge on a cashmere sweater, a four-star meal, or some other wickedly expensive fill-in-the-blank.

But if you want the cash-induced serotonin boost to last a little longer, why not splurge on an experience that creates lasting memories or new talents?

That trip to the dude ranch you've always dreamed about or that cooking class you never could afford may be just the thing.

Or, as Steinmetz put it, "Now might be a good time to pursue that dream while it's not cutting into your nest egg."

Jeanne Sahadi writes about personal finance for CNN/Money. She also appears regularly on CNNfn's "Your Money," which airs weeknights at 5 p.m. ET. Please let her know what you think about this or other columns by e-mailing her at everydaymoney@cnnmoney.com.