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Reasons to Avoid Paying Taxes with a Credit Card

Reasons to Avoid Paying Taxes with a Credit Card

Can you think of anything worse than finding that you owe the IRS a large chunk of money?

If you find yourself in this position, you can’t dwell on the past. Instead, you need to determine what went wrong and decide how you’re going to pay the money you owe.

The best option is to pay your taxes in full, with cash, and then move on. Of course, this is not possible for many people.

At some point, you may begin to wonder if you should pay your tax bill with a credit card. As tempting as this may be, here are three reasons to avoid it:

1. High processing fee. Did you know that the IRS is not permitted by law to cover fees charged by your credit card company? For this reason, you’ll get hit with a service charge if you pay your tax bill with a credit card.

With the ability for this charge to reach higher than two percent of your total payment, it can quickly add up.

2. Interest. If you have a credit card with a zero percent introductory rate this doesn’t apply to you. If you don’t, it’s something to take into consideration.

If you pay your tax bill with a credit card and carry the debt from month to month, interest charges can begin to weigh you down. Be sure to get a basic idea of what you’ll pay in interest before you choose to pay with a credit card.

3. Less credit for other purchases. In some cases, due to a high tax bill, you could eat up all your available credit. This may not be a big deal to some, but others find that it puts a giant cramp on the way they typically live.

These are just a few of the reasons to avoid paying taxes with a credit card.

Can you think of any other reasons why this may not be the best idea?

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Comments 1

Frank on Thursday, 29 September 2016 11:22

If there is no processing fee and you have the cash, it is not a terrible idea. In theory you just get the rewards and then immediately pay it off. Only works if there is a little or no processing fee, and you actually have the cash to pay it off.

If there is no processing fee and you have the cash, it is not a terrible idea. In theory you just get the rewards and then immediately pay it off. Only works if there is a little or no processing fee, and you actually have the cash to pay it off.
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Wednesday, 23 October 2019

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