Can I Pay My Taxes with a Credit Card?
Audio version available here:
Length: approx. 1 min. 30 sec.
A recent Forbes survey revealed that “36% of consumers [use a] physical or virtual credit card” to pay for their purchases. Naturally, some would try using it to pay their tax balance. However, it is important to understand the pros and cons of doing so.
Utilizing a credit card to pay your taxes is helpful if you do not immediately have the funds to pay your tax obligation. With some balance transfer credit cards offering no interest for limited periods of time, you could further delay your full tax payment. Additionally, paying taxes with a credit card could result in rewards, since many cards provide “cash back, points or miles” on purchases, potentially earning you a nice return if your tax balance is a sizable amount of money.
However, the most glaring negative of using a credit card to pay your taxes is the inevitable fee from third party processors. This fee is a “percentage of your tax payment” decided by the third party processor, but none of the fee goes towards your tax balance. The IRS also sets limits on how many card transactions can be made by a taxpayer. Finally, there is an inherent risk to utilizing a credit card, for if you do not pay the card’s balance “in full by the due date”, there may be “significant interest charges” and damages to your credit score.
Utilizing your credit card to pay your taxes is not viable for everyone, but may be the best option for you. If you need additional guidance on the best ways to prepare and pay your taxes, reach out to our experts at XQ CPA. Our tax professionals would love to assist you.
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