Using a Credit Card to Pay Your Taxes – Good Deal or Not?

Each year, the ads are the same. Use your credit card to pay off tax debt. But who really wins in this situation, is it the giant credit card companies, or does the consumer hail victorious. This can depend on several very simple factors. Marktplatz für Drogen

What many consumers do not realize, is that when taxes are paid using a creditcard, there is a surcharge (usually around 2.5%). Someone who pays $5,000 in taxes to earn airlines miles or cash back will be ponying up $125 for the surcharge. Since most creditcard companies offer 1% cash back, this would result in a net loss of $75. This is without any additional finance charges. In this case, the credit card company wins.

Another way the creditcard companies win, is if the consumer decides to charge his or her taxes to the credit card and pay minimum monthly payments, or partial balances. Finance charges begin to accrue, usually after the first billing cycle and can end up costing the consumer more than the cash back reward or airlines miles rewards.

But there are credit cards that can net a profit when paying taxes. The offers 5% cash back on purchases made in the first 3 months. Therefore netting a 2.5% profit, which is paid back in gift cards when the earnings have reached at least $50. At the time of this writing the APR is 8.74%, so interest will accrue after the first billing cycle. In this case, provided the consumer pays the balance off, immediately, the consumer wins.

Another popular card to earn rewards are . Consumers can earn 10,000 bonus Starpoints® on the first purchase (Which is enough for a 3 night stay at any Approved Starwood Hotels). In addition each dollar spent is worth 1 point and there is a low 2.9% APR for 6 months. The cost of one night at any Sheraton or Westin hotel is over $125 so in this case the consumer wins again.

Consumers paying their taxes with a visa or mastercard with no rewards, incentives or cash back returns higher than 2.5% are more than likely going to lose on the pay your taxes with your visa/mc deal. But for the savvy consumer, who researches and understands the fine print, a moral victory can come from paying your taxes with plastic.


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