But the Blue Cash Preferred® Card from American Express does not offer rewards for tax payments. “It’s always good to read the fine print and ask questions before counting on points.”įor example, Citi Double Cash and Capital One Quicksilver Cash Rewards Credit Card credit cards both can be used to pay taxes and earn rewards. “Not all reward point programs are the same, and some usage categories may limit or restrict the accrual of points,” he says. However, unless those points earned equal more than 2% of the purchase, you won’t even break even on the swipe fee.įurther, if you’re using a card because you don’t have the cash on hand, you might think the rewards points might at least offset the fees and interest a little, but McClary says you should think again. You might think that using a credit card to pay-even if you have the cash on hand-might be worthwhile if your credit card offers reward points. You may not earn rewards on your tax payment “If your tax bill is equal to more than 30% of your assigned credit limit, you’ll want to pay off the balance before the next billing period or expect your credit score to drop,” says Bruce McClary, senior vice president of membership and communications at National Foundation for Credit Counseling, a nonprofit financial counseling organization.īy causing your credit score to dip, this could mean you may not qualify for other types of credit-such as a car loan or mortgage-until you pay down the balance and your credit score can rise back up to reflect that. First, because you’ll have a larger balance to pay down and, second, because any new large charge will take up a greater portion of your total available credit. Need another incentive to quickly pay down the credit card that covered your taxes? Adding a hefty credit card charge will lower your credit score and it will be reported on your credit report. Similar to charging other big ticket items like travel accommodations or furniture for your home, your utilization is sure to reflect your recent tax payment. Charging a large tax bill can impact your credit score That means, as much as you’re able, you should try to pay more than the minimum payment every month, which will chip away at the total you own much faster and reduce the total interest you’ll pay (assuming you don’t use a 0% APR card). How long should you take to pay it off? “A year is the most I would want to see someone put their tax bill on a credit card,” says Khalfani-Cox. And the same goes for a credit card charged to the brim with a tax bill. It’s best to pay off your balance ASAPĪs with any credit card, paying down the balance is key. That way, you’ll minimize how much you’ll have to pay in interest as you make your credit card payments. The ongoing variable APR is 19.24% - 27.99%.ĭon’t qualify for 0%? Reach for the card in your wallet with the lowest APR. That means you could sign up for a card in April, 2022, use it to pay your tax bill, and have until July, 2023 to pay it off without any interest. “If you find a new purchase at 0%, that’s the one you want to use to pay your tax bill,” says Lynnette Khalfani-Cox, chief executive officer and co-founder of AskTheMone圜, a free, financial advice site.įor example, the Chase Freedom Flex℠ which we named the best Credit Card with no annual fee, card has a 0% APR for 15 months on both purchases and balance transfers. This is a smart way to potentially eliminate your credit card interest charges when you are charging a hefty tax bill-assuming you can pay off the credit card within a year of the IRS payment. Reaching for a card with a 0% annual percentage rate (APR) for new purchases will help to lower your costs because you’ll be charged no interest on your card balance for the length of the 0% offer. You’re better off using a no- or low-interest card That means if you own $10,000 and put it all on your card, you’ll pay around $200 just for the swipe fee. In most cases, this hovers just under 2% with a minimum swipe fee of around $2.50. The fee the IRS requires you pay will depend on the payment processor that the card issuer uses. The IRS, however, is not in the business of paying any fees for your convenience, so it will charge you for the privilege of using a credit card to pay your taxes. When you pay for anything with a credit card, the recipient of the payment has to cover the processing fees for use, also known as a swipe fee-that’s why some retailers and restaurants often have a credit card minimum for payment, as they don’t want to incur the financial hit for a low-value sale. The IRS is no exception when it comes to swipe fees–be mindful of this prior to reaching for your plastic.
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