Why paying taxes by credit card probably isn’t a good idea
Taxes have to be paid, and putting them on your credit card might seem a good option. Maybe you need more time to come up with the money, or you’re imagining the rewards you could rack up by putting a big expense on your card. But it probably isn’t a good idea, and here’s why. YOU’LL PAY PROCESSING FEES When you buy something with a credit card, the merchant pays processing fees to the financial institutions that handle the transaction. But when you put a tax payment on a credit card, the IRS doesn’t pay those processing fees. You do.
You will have to use one of the IRS’ thirdparty credit card processors, which charge fees of 1.87 percent to 2 percent of the amount you put on the card. If you use software such as TurboTax to file returns and pay taxes online, the fees may be higher. YOU COULD INCUR INTEREST CHARGES “Depending on the interest rates on your credit card, you could end up paying a lot,” says Trish Evenstad, president of the Wisconsin Society of Enrolled Agents , a group of tax experts. Her advice to people who can’t pay in full: “Pay as much as you can by the April 18th due date, then you can set up an installment agreement with the IRS to pay the remaining balance.” YOU COULD HIT YOUR CREDIT LIMIT Charging a big tax bill on your card could put you within spitting distance of your credit limit, making it easy to max out the account and incur penalties. Your credit could also suffer. NerdWallet