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Dont Use Credit Cards to Pay Taxes
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According to the IRS, 1.57 million taxpayers used a credit card to pay their taxes last year and a third did so in order to get points. I wonder how many of them knew that they were charged an extra 2.49% on top of their tax bill in order to cover the credit card merchant fee and seal a little bit of profit for the processor. There are two companies that process credit card payments, Link2Gov and Official Payments, and they were the ones who earned points, not consumers.
Paying an extra 2.49% to get points or cashback is foolish because you’re paying $2.49 now so that you can get $1.00 in a month (plus how long it takes to get the check to you). And it’s even worse if you’re talking about points because on most points or mileage programs, the value of what you get in points is usually less than 1% cashback.
For those of you who can’t afford the bill and are turning towards credit, a better option would be find another source to borrow from. The 2.49% plus the insane interest that credit cards are charging can put you much farther into the hole than you realize. While it may be too late to cash in on a 0% balance transfer deal to hold you over, consider going to your bank and requesting a loan.
Of course, some of this might already be obvious to the more financially savvy but sometimes you forget so it’s always good to get a brief refresher.
via the New York Times.
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Just a comment…it’s is possible to find 1.99% deals on paying with you credit card. I wrote about it earlier… At the same time, if you can make a nice profit on the amount your paying, it might be worth it. For example, if you are getting 0% interest on purchases through 12 months, then taking a 2% hit will allow you to net the different in interest if you were to put that money away…of course it’s not that simple with taxes on the interest, monthly payment, etc. but I’m just bringing it up…
If you’re getting 0% interest on purchases through 12 months, you’re likely able to get 0% on balance transfers for 12 months and you should be paying some other way and getting the money via a BT instead of a 1.99% purchase.
I follow you in theory but I think in practice there are better alternatives.
Wow, 2.49% is a lot! I heard about this option, but didn’t research it because I, unfortunately, received a refund this year.
That has to be one of the worst ideas I’ve ever heard. Good info.