Rosalind Evans
Are you contemplating using your credit card to pay this year’s taxes? Sometimes, the idea can be beneficial. For instance, if you know you’ll get the money to clear your tax dues a few weeks post the IRS deadline, using a credit card as a brief loan can be a solution. Pay the card off once you have the funds.
Moreover, a 0% introductory interest credit card can help you spread the tax burden across several months or even a year. Although the IRS offers payment options, they come with interest. Avoid this by using a 0% interest card.
One more incentive is gathering credit card rewards. Though this method involves fees, if the rewards outweigh these costs and you clear your card balance by the due date, you can sidestep interest.
However, understanding the best methods and cards to utilize is crucial if you’re contemplating this approach.
Top Credit Cards for Tax Payments in 2023:
– Citi® Double Cash Card: Ideal for cash back.
– Chase Freedom Unlimited®: Outstanding 0% introductory APR.
– Chase Sapphire Preferred® Card: Optimal for diverse travel perks.
– Hilton Honors American Express Surpass® Card: Top hotel bonuses.
– The Blue Business® Plus Credit Card from American Express: Perfect for business tax payments.
But before discussing the specifics of each card, let’s discern how to pay federal taxes via a credit card.
Procedure to Pay Federal Taxes with a Credit Card:
While the US government doesn’t directly accept credit card payments for taxes, they’ve approved three entities to handle these transactions. These firms charge fees based on your income, so account for this when settling your tax dues using a credit card.
When ready, access the chosen firm’s site, provide necessary details like name, address, and taxpayer ID, and make the payment.
Note: Many states accept state tax payments via credit cards, so it’s worth checking this option.
From the current data, the tiniest percentage fee for using a credit card for federal tax is 1.85%. Given that most cash-back credit cards offer returns below 1.85%, you might spend more in fees than you receive in rewards.
However, specific cards offer higher rewards or other benefits, making them viable.
Examining the Best Options:
1. Citi Double Cash: Suitable for those aiming for marginal rewards on a sizable tax bill.
2. Chase Freedom Unlimited: Offers rewards with the flexibility of paying taxes without accruing substantial interest.
3. Chase Sapphire Preferred: If turning your tax payments into vacation rewards is appealing, this option is robust.
4. Hilton Honors American Express Surpass: This can help you earn a complimentary hotel stay while paying taxes.
5. Blue Business Plus from American Express: Designed for small businesses aiming to reap rewards on their tax bills.
Should You Use a Credit Card for Tax Payments?
Though these credit card deals are attractive, always approach them with a strategy. If you want rewards, ensure you have funds to cover the card bill to avoid interest. For those wanting a 0% APR, plan monthly payments to clear dues within the promotional period.
In essence, consider the following scenarios for credit card tax payments:
– Needing extra time for payment.
– Using a 0% APR card to spread payments without interest.
– Gaining rewards, given you can clear the bill before accruing interest.
– Leveraging the tax amount to attain card bonuses.
Paying taxes with a credit card can be advantageous with the right strategy and awareness of your financial standing.
In a financial landscape that’s continually evolving, the ability to pay your taxes with a credit card can present both opportunities and pitfalls. It’s crucial to approach this option carefully, ensuring that the benefits you seek—whether extra time to pay, accruing valuable rewards, or leveraging an enticing introductory APR offer—outweigh the potential costs. As always, it’s essential to prioritize your financial health and make informed decisions that align with your broader financial goals and strategies.
