Updated September 2, 2014

Paying Taxes with Credit Card

Read more about Personal

Several third-party companies offer a way to pay your taxes with a credit card instead of cash, but should you? Most financial advisors say that it's never a good idea to pay with anything but cash; however, besides the convenience factor, a savvy consumer can find ways to eke out a little benefit from choosing plastic over cash from now until April 15th.

The Problem with Paying Taxes with a Credit Card

A downside to paying your tax bill with a credit card is the "convenience fee" or "card fee" that these third-party companies charge to process your payment. These fees vary but are between 1.88% and 2.35%. The IRS lists which companies process credit card tax payments, and how much they charge.

Because of the extra cost involved, it's obvious why most experts suggest using cash to pay for taxes. Even with the typical cash back reward of 1% on charges, you'll still wind up paying more out of pocket by choosing a credit card rather than cash to pay your taxes.

Very Hidden but Valuable Benefits

Still, many taxpayers who find they owe more than expected might have little choice than to use their card and take some time to pay back their debt to the taxman. If you are one of those people this year, know that there are ways to cut your losses – and possibly even come out a little bit ahead.

If you have a card that requires a high minimum spend to get extra bonus points in the introductory period of the card, a high tax bill could easily help cover that amount.

Another way to get a little bit ahead is to pay your taxes with a new card that offers a 0% introductory APR for a set period. This way, in exchange for that convenience fee, you will at least get a bit of interest-free breathing room to pay off your tax bill over an extended period. With some cards offering a 0% intro rate for over a year, this is a good way to ease the pain of a high tax bill.

There is another option if you're not financially able to pay your tax bill immediately. You can consider applying for an installment agreement with the IRS to set up monthly payments rather than pay the whole bill up front with cash or credit card.

Of course, the most cost-effective way to pay your taxes is cash. However, there are some ways to offset the convenience fee for those who plan carefully and choose the right card to use by tax time.

Share this on Facebook or Twitter

Follow @CreditDonkey or write to feedback@creditdonkey.com

More Articles in Deals

Consumer Cards

Do you plan to spend more or less on Cyber Monday versus last year?

Holiday Shopping Trends 2013

Though many experts expect only modest sales gains this holiday season, a new poll by CreditDonkey.com suggests that online sales will actually post big gains this November and December.

Articles on Paying Taxes with Credit Card

    Do you plan to pay your entire tax bill in one payment?

    Tax Paying Statistics

    February 12, 2013 - By Charles Tran - News
    Although a number of third-party companies are now offering to let taxpayers settle their tax bills with credit cards instead of cash, a CreditDonkey.com survey suggests that this is an idea whose time has not yet come.
    Will you mostly spend or save your tax refund?

    Tax Refund Statistics

    February 11, 2013 - By Naomi Mannino - News
    Survey says savings! This year, 56.1% of respondents to a CreditDonkey.com survey said they are going to save their refund money instead of spending it on something frivolous...like a pair of really high-end sneakers.

What do you think about Paying Taxes with Credit Card?

Name (required)
Email (required; won't be published)
Website (optional)

or you can also trackback from your blog.

Is Discover It a Good Credit Card

Is Discover It worth it? The most popular offering by Discover can be well worth the application for the following 10 reasons. To round out this list, we’ll also give you 3 reasons why you might want to look elsewhere:
More Articles in Deals






About CreditDonkey®
CreditDonkey is a credit card comparison website. We publish data-driven analysis to help you save money & make savvy financial decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

†Advertiser Disclosure: The card offers that appear on this site are from companies from which CreditDonkey receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). CreditDonkey does not include all companies or all offers that may be available in the marketplace.

*See the card issuer's online application for details about terms and conditions. Reasonable efforts are made to maintain accurate information. However, all information is presented without warranty. When you click on the "Apply Now" button you can review the terms and conditions on the card issuer's website.

CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.