Resist the Urge to Pay Taxes with Credit Cards

This tax season, financial experts are urging consumers not to pay their taxes with credit cards.

Of course, the urge to pay with plastic can be quite intense, given all the things we tend to pay with credit cards—food, drink, clothing, and electronics, for example.

If you find yourself facing a large federal tax bill, you may be tempted to simply charge it. Some observers note that paying your taxes with credit cards does carry some advantages. For one thing, it’s convenient; for another, it will help you avoid costly penalties. In addition, you can gain valuable rewards by using your credit cards.

However, paying your taxes with credit cards can be a costly enterprise. For instance, you’ll have to pay a fee which will be a minimum of 2.49% of your tax payment. Even if you use a credit card with a 0% interest rate, you’ll still have to pay a fee.

You actually could come out money ahead if you instead use the financing alternatives offered by the Internal Revenue Service. While you will have to pay a fee of $105, the interest that you’ll pay - 3% - is far lower than you would pay using a typical credit card. In addition, the rewards you might gain using a credit card are hardly worth the cost.

If you find yourself owing taxes and you calculated the bill yourself, the best thing you can do is to ask a tax accountant to go over your work. It’s entirely possible that there are some tax breaks that you are simply not taking advantage of. A savvy accountant may be able to save you money that you can then sock away in your savings account - or apply to an outstanding credit card balance. Taking the time to recalculate your tax bill could pay handsome dividends in the long run.

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