Pay Your Taxes with a Credit Card?
Even though everyone’s favorite day of the year was just a few days ago, we can still talk about taxes and cover another option for you to next year, or for any of you last minute filers who had to file for an extension. Did you know you can pay your taxes with a credit card? As crazy as it may seem, it’s true. Unfortunately, like all things, there are pros and cons and paying your taxes with a credit can swing both ways. Here are just a few things you should look out for if you ever want to pay your taxes with a credit card.
First you might as, why would I even think about paying my taxes with a credit card? The first and most obvious answer to the question, is that you don’t have the necessary funds to pay towards Uncle Sam at the moment. If you delay your payment for taxes, the monthly late fee is 1% of balance due, which comes out to $10 for every $1,000 owed…. or you can pay on time with a credit card.
Here are the PROS and CONS to paying your taxes with a credit card:
PROS – Put it on the Card!
EARN REWARDS
I’ve talked about how awesome American Express is with rewards and customer support for their members, especially business card holders. If you had several thousands of dollars to pay in taxes, you could throw that onto your credit card and rack up a decent amount of rewards points. Some credit cards have restrictions on what type of purchases qualify for rewards points, so be sure to read the fine print.
(American Express also offers 5% back on all Yahoo Business Solutions. Yes! That includes Yahoo Search marketing)
LESS PAPERWORK
If you pay your taxes with your credit card, you can pay it off past the April 15th deadline, by paying your credit card company directly. This option is also available through the IRS, but there is a decent amount of paperwork you will need to file and fill out.
CONS – Keep the Plastic in Your Wallet!
MASSIVE INTEREST
Depending on your current credit card, you may have a decent or very high interest rate. If you throw a large chunk of owed taxes onto your credit card, you could end up paying a lot more than you actually owed in taxes. Interest can rapidly build up on you!
CONVENIENCE FEE
Uncle Sam is always going to get his money somehow. If you pay your taxes with a credit card, not only will you have to keep an eye on your interest rates and late payments, but the IRS will also get you for a 2.49% convenience fee! If you owe $10,000 in taxes, you are looking at an extra $250, just for using your card!
Credit cards and rewards programs are awesome, but I would stay away from paying your taxes with them. Just like regular purchases on your credit card… interest rates, late payments and your credit score can all be affected by your decision to pay your taxes with your credit card. (if and when you can pay it off) Unless you really want those rewards points and/or have a stash of cash to pay off your credit card tax bill right away, keep the plastic and taxes separate next year.
Wait... before you leave, consider these top resources:
Great tip. I do this anytime I have a big purchase. Just be sure to pay it off so the interest doesn't kill ya! Great to earn some rewards though.
They really charge you a CONVIENANCE FEE? Are you Fu&*in kiddin me!
Of course they will, when you bank wire money there is no charge to them. When you use a credit card, they lose around 2-3% depending on the credit card company.
hmmm. YEa. I can see why some would do that.
how about paying with a vitual credit card? lmao
So, I can go further into debt by paying my taxes? How warped is that?
I really despise tax time… let's just skip a couple months and pretend it doesn't happen 🙂
It’s a never ending circle Zac, you pay your tax because they track you high expenses and the credit card in one of the things that they track! You pay your taxes from the credit card and they track you back. 😯
lol
Why should we pay taxes. That's our hard earned money 😀
Using credit cards for so many things freaks me out a bit.
Those interest charges can really get you.
Or you could not have taxes taken out of your paycheck during the year, invest it in something that earns over 3% a year, then pay it all at the end of the year with a credit card. Then you get the points and make money on the difference between the return and the convenience fee.
For the most part though, it can be really dangerous to pay off your taxes with a credit card. The interest, the fact that many people struggle to pay off normal CC debt just don't make the rewards worth it. Plus your bank/cc company may have hidden fees for paying your taxes with a CC.
Not worth it.
It can't be a great idea to use a debt instrument to futher extend the time to actually pay the taxes due. I believe the best policy is to pay the tax when the income is earned and remove the temptation to use that money as a line of credit.
I use a credit card for big purchases like adding funds to my Yahoo Search Marketing advertising and Google AdWords accounts. I do it just for the mileage awards from American Airlines. However, I always pay it off in full the next month to avoid the interest. That's the best way to get the maximum benefits. Nothing like getting miles for buying something you were going to buy anyway and paying it off right away to avoid any interest. Credit card companies probably hate me. LOL