Think Twice Before Paying Taxes With Credit Card
So maybe you just came up short this year at tax time. It’s easy to understand, with out-of-control living costs being just one of the current economic worries. It can be tempting and very easy to knock that bill out with your Visa, MasterCard, American Express or Discover credit card by visiting OfficialPayments.com or calling 1-800-2PAY-TAX.
As the Pittsburgh Post-Gazette points out in a recent article, however, the easiest option is probably not the best one. The main benefits of paying the IRS by credit card would be:
a) you don’t have to deal with the IRS for several more months.
b) You could reap major rewards points.
The main problem with paying the IRS by credit card is that the interest on the credit card balance, if not paid off in full on the next billing cycle, could be as much as four times the rate charged by the IRS with its installment payment plans. The IRS only charges eight percent interest on such plans. Find me a credit card holder of more than a year with an interest rate that low.
Furthermore, the article points out, the 2.5% processing fee typically charged to merchants in credit card transactions will be pushed onto the credit card holder when dealing with the IRS. This is because the IRS is exempt from paying the fee. Ironically, the fee amount typically negates and surpasses the value of the credit card rewards. And let’s not forget one of the criteria FICO looks at in calculating your credit score — ratio of debt to available credit. This ratio could be drastically affected by a hefty IRS payment on the credit card, thereby lowering your credit score. So again, think twice before paying taxes with your credit card and consider all possible repercussions.
April 19th, 2008 at 5:45 pm
[…] post by Hayli Morrison This entry is filed under Credit card. You can follow any responses to this entry through the […]
April 19th, 2008 at 5:53 pm
[…] Think Twice Before Paying Taxes With Credit Card It’s easy to understand, with the out-of-control cost of living being just one of the current economic worries. It can be tempting and very easy to knock that bill out with your Visa, MasterCard, American Express or Discover credit card … […]
April 19th, 2008 at 5:59 pm
[…] Think Twice Before Paying Taxes With Credit Card It’s easy to understand, with the out-of-control cost of living being just one of the current economic worries. It can be tempting and very easy to knock that bill out with your Visa, MasterCard, American Express or Discover credit card … […]
April 19th, 2008 at 6:04 pm
[…] Kaufmann’s Capital Comments wrote an interesting post today onHere’s a quick excerptThink Twice Before Paying Taxes With Credit Card By Hayli Morrison | April 19th, 2008 So maybe you just came up short this year at tax time. It’s easy to understand, with out-of-control living costs being just one of the current economic worries. It can be tempting and very easy to knock that bill out with your Visa, MasterCard, American Express or Discover credit card by visiting OfficialPayments.com or calling 1-800-2PAY-TAX. As the Pittsburgh Post-Gazette points out in a recent article, ho […]
April 19th, 2008 at 9:23 pm
[…] Think Twice Before Paying Taxes With Credit Card It’s easy to understand, with the out-of-control cost of living being just one of the current economic worries. It can be tempting and very easy to knock that bill out with your Visa, MasterCard, American Express or Discover credit card … […]
April 20th, 2008 at 11:00 pm
[…] Think Twice Before Paying Taxes With Credit Card So maybe you just came up short this year at tax time. It’s easy to understand, with the out-of-control cost of living being just one of the current economic worries. It can be tempting and very easy to knock that bill out with your … […]