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Taxes and credit cards don’t go well together
Recently, I informed you of how businessmen can now charge their taxes to their credit cards. This facility has already been availed to individual taxpayers who have made good use of it. What we haven’t yet discussed is the downside of doing this. Of course, there is a really big downside here and that is the heavy loss of money that you can incur if you do it. To put it simply, charging taxes to your credit card can be an expensive mode of payment, especially when the IRS offers an installment plan. Yes you heard me right there. The IRS offers enough benefits to negate any positive impact that you could have got from using your credit cards to pay taxes.
And now many debt settlement firms have begun asking their clients to resist the many incentives offered by companies to encourage them to pay taxes with their credit cards. You will be (or have already been) bombarded with rewards including offers of points, miles and many others just so you can charge the taxes to their cards. Some card companies even offer cash-back rewards.
Now here is the murky underside which none of these companies want to discuss: If you opt for this mode of payment, the service providers that process your transaction will charge a fee of 2.49 percent of the amount owed. So, if you owe $1000 in taxes, you will pay an extra $25 to the service provider. Then there are the interest rates and potential penalties in case you default on payment. So, what exactly is the benefit of using your credit card here when the IRS offers you the much better option of paying in installments?
If you still think that charging taxes to your credit card is a good option, then before you exercise this option, read the fine print that accompanies any special offer and develop a plan that will help you pay it off as soon as possible.
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