NEW YORK (LowCards.com) -- Tax Day is less than a month away. This is the time credit card issuers start encouraging customers to use their cards as a convenient way to pay their tax bill.Even the IRS promotes the benefits of using a credit card to pay taxes. The IRS website says payment with a credit card is "convenient, safe and secure," and reminds taxpayers that if they are enrolled in a rewards program, they can earn miles, points and cash back.
- Find out your credit limit before you charge your taxes. Debt utilization is a major factor in credit scores. If you use too much of your available credit, you can hurt your credit score.
- Do not write your credit card number on your tax return.
- Make sure your payment is treated as a purchase, not a cash advance. The cash advance APR can be 25% and the cash advance fee varies from 3% to 5%, depending on the issuer.
Using a reward credit card to pay taxes is not an easy way to earn reward points to pay for your summer vacation. The average reward is 1% of a purchase, or 1 cent per dollar spent. This is much less than the 2.35% processing fee. You will save money writing a check for the taxes and paying cash for your vacation. American Express ( AXP) allows you to use rewards points toward your tax payment and convenience fee on officialpayment.com and pay1040.com. To pay off $5,000 in taxes, though, a cardmember would have to charge $1 million -- it takes 200 points to pay off $1 in taxes. Other payment options
If you can't afford to pay your taxes, look for other options.
- An installment plan with the IRS is one possibility.
- Your bank or credit union may also give you a personal loan with a lower interest rate than your credit card's APR.
- You can also pay with a debit card, and the fee is much cheaper. For example, you will be charged a flat fee of $3.89 when you use your Visa (V) debit card.