Is It a Good Idea to Pay Taxes With A Credit Card?
About 54 percent of taxpayers used credit cards to meet their 2006 tax obligation. The number is expected to increase this year, thanks to heavy marketing by credit card companies offering double reward points specifically for tax payments.
A desire to collect such reward points is the main argument people use to justify paying their tax bill with plastic. However, The Washington Post reports that poor planning also comes into play for small business owners, where using plastic to fit the bill for taxes and tax prep services is a growing trend. In fact, credit card spending on such expenses rose 80 percent over the last year, the Post reports.
The IRS has allowed taxpayers to pay with credit cards for about a decade, and many states allow credit card payments for state income tax as well. Convenient in a pinch, but fees make the long-term picture a little less rosy. In fact, Sound Money Tips blog features a pretty convincing argument against credit-backed tax payments:
“The biggest problem is that when you pay taxes by credit card, the charge comes with a 2.49% surcharge to third-party companies that process the transaction. Most people find this charge a surprise because processing surcharges are usually not allowed by credit card companies. This surcharge effectively wipes out any bonuses that credit card companies offer and often means you’ll lose money even with the added promotion incentives and if you pay off your credit card on time and in full.”
October 30th, 2007 at 1:03 pm
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October 30th, 2007 at 1:15 pm
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October 31st, 2007 at 3:33 am
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October 31st, 2007 at 4:06 am
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November 10th, 2007 at 5:00 am
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