Tax day is right around the corner. If you haven’t filed yet and if you own money to Uncle Sam, you might be tempted to make your payment with your credit card. While this is certainly a convenient method for paying your taxes and may seem like an easy way to score some major points or miles toward your credit card rewards program, paying your taxes with your credit card really isn’t a good idea.
Of course, if you fail to pay the balance off in full at the end of the month, you will get hit by finance charges that can also quickly add up.
Although paying taxes by credit card makes no sense financially, nearly 2 million people paid with their plastic in 2006. This figure was up by 36% when compared to 2005. Obviously, the figures for this year aren’t out yet, but it is certain to continue to rise as our societal dependence upon credit cards continues to grow.
If you are wondering why the fees for using your credit card to pay your taxes is so high, the answer is really quite simple. You see, credit card companies are always paid a fee by the merchant that accepts the card for payment. Since the IRS isn’t allowed to pay the fee, the person using the card needs to swallow the cost. Pretty ironic considering all of the heat the government has recently been placing on credit card companies because of their high fees, huh?
Rather than use your credit card to pay off your tax bill, pay enough toward your taxes each year so you can get a bit back when you file. That way, you can use the money you get back to pay off your credit card bill rather than the other way around.
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