Before you pay your tax bill using your credit card, there are a few things you need to critically consider. The benefits you earn from most credit cards also come with fees and interest rates. If you run out of cash to clear your balance, consider the IRS as a payment plan. Paying with your credit card earns you perks, especially when you pay on time.
You can make payment on IRS with checks and mobile transfer. You can also pay through a plastic processing company.
Paying taxes with a credit card- Pros and Cons
According to CreditCards.com, the average credit card is currently at 17.64% high. Paying your tax with your credit card is not free; the certified financial planner David Mendels, director of planning at Creative Financial Concepts in New York said. Customers are here cautioned against paying taxes with their credit card to avoid erasing their rewards.
Consider the possible advantages and disadvantages of paying IRS with your credit card. Even if you have the money in your account, pay attention to the possible outcomes before you make the payment.
Ted Rossman, industry analyst at CreditCards.com; rightly observed that we all love rewards that come from credit cards either as cash back or travel miles.
Paying a large sum of money as a tax might make you think of earning rewards for your spending. However, payment made directly from credit card companies is not accepted by the IRS. Third party service option is now made available by the federal government; though service charge applies. Link2Gov Corp is one of them.
Mendels shared his view also by saying that the process is not astronomical, but it’s not anything, also.
Again, Rossman said that the IRS-approved card processors charge a minimum convenience fee of 1.87 percent from customers and can charge up to 1.99 percent. It is not the same with rewards cards, they offer about 1 percent to 2 percent cash back.
According to Rossman, paying tax with plastic could be ideal. However, it can only be possible if you qualify for a credit card sign up bonus. Applicants stand to benefit a lot ranging from points to miles or even cash back.
To qualify for the card, customers are to make a big purchase with the company especially within the first few months of account opening. Thus, if you don’t regularly spend much, you can use the tax payment to make up. That way, you might earn travel miles or even cash back; said, Rossman.
Some credit card companies do not charge interest rate up to 21 months or 18 months on balance transfer and new purchase respectively. Rossman sees this zero percent offer as the easiest means of paying your balance.
What is more, you will have to pay within the scheduled time to boost your rewards. Do not pay late to avoid boosting the interest instead.
If you want to avoid getting into debt, consider IRS and pay in installment. The shortest form last for 120 days with little interest. Rossman here again is saying that even though the IRS option seems friendly, you have a little time to complete the payment.