Those who owe taxes this year may be thinking if it’s a good idea to pay them with a credit card. This may appear to be a risky proposition, but there are instances when it makes sense. For example, suppose you plan to have enough money to pay your taxes but won’t have it until sometime after the IRS deadline. You can use a credit card as a short-term loan to meet your debts, then pay your credit card charge when you’ve received the funds.
You might also use a credit card with a 0% introductory interest rate in order to space out your tax payments over months or possibly a year. While the IRS accepts payment plans, you will be charged interest if you pay over a period of time. You may prevent this by using a credit card with no interest.
Another incentive to use a credit card for tax payments is to gain additional credit card benefits. There are costs associated with this, but if you can accumulate enough points to make them more valuable than the charge, you can still come out ahead if you pay your credit card payment in full by the due date. You won’t incur interest costs this way.
No matter why you would want to use a credit card to pay your taxes, it’s critical that you comprehend how to do it and which cards to use.
Should you pay taxes with a credit card?
While credit card offers are tempting, you should only use a credit card to pay your taxes if you have a plan. If you want to receive incentives, for example, you must have enough money set aside to pay off your credit card account in full before interest is levied. If you want to take advantage of an introductory 0% APR, you’ll need to figure out how much you’ll be paying each month so your tax payment doesn’t linger past the introductory offer’s expiration date.
In summary, there are a few instances where paying taxes with a credit card makes sense:
- Your bill is due, and you require additional time to pay it.
- You want to pay your tax bill using a credit card that has an introductory 0% APR offer so that you don’t have to pay interest when making payments.
- You want to earn rewards with a credit card and you may pay your account in full before interest is applied.
- You have enough money to pay your tax obligation, but you’d rather use it to receive a large credit card welcome bonus or a spending incentive like a free hotel room.
- Finally, if you wish to pay your taxes with a credit card, you should have a good rationale and plan in place.
The best credit cards for paying your taxes in 2023
The greatest credit card to use for paying your taxes is highly dependent on your goals. Do you want to receive credit rewards, or do you want to earn a large bonus through your tax bill? Perhaps you’d want to take advantage of an introductory 0% APR to pay off the debt over time. Here are our best options for paying your taxes using a credit card in each of these scenarios:
- Citi® Double Cash Card: Best for earning cash back.
- Chase Freedom Unlimited®: Best introductory 0% APR offer.
- Chase Sapphire Preferred® Card: Best for flexible travel rewards.
- Hilton Honors American Express Surpass® Card: Best hotel bonus.
- The Blue Business® Plus Credit Card from American Express: Best for business taxes.
Each of these cards are good options for paying taxes, but before we go into specifics, let’s go over the process of paying your taxes using a credit card so you know the process.
How do you pay federal taxes with a credit card?
The US government does not accept credit cards for tax payments. It has, however, permitted three corporations to accept credit card federal tax payments on its behalf. When you pay with a credit card, each of these firms charges a fee as a percentage of your tax payment, so keep this in mind when using your card to pay your tax obligation.
Fees differ depending on the firm you select and whether you pay the IRS using a credit or debit card. Here’s a list of the firms that take credit cards for federal tax payments, as well as the fees they impose as of this writing:
|PayUSAtax||Pay1040||ACI Payments, Inc.|
|Credit card fees||1.85% (minimum fee of $2.69)||1.87% (minimum fee of $2.50)||1.98% (minimum fee of $2.50)|
|Debit card fees||$2.20||$2.50*||$2.20|
|* Consumer and personal debit cards only. The fee for all other debit cards is 1.87% ($2.50 minimum).|
To pay your taxes with a credit card, go to the company’s website and make the payment there rather than with the IRS. To pay this manner, you must supply all of your basic information, including your name, address, date of birth, contact information, and taxpayer identification number (often your social security number).
Pro tip: Many states allow you to pay state taxes using a credit card, so make sure to look into this option in your state. Don’t forget to examine the costs for paying state taxes with a credit card at several providers (if accessible), which are frequently identical to the convenience fees paid to pay your federal taxes.
According to the table, the current minimum percentage you’ll have to pay to pay your federal taxes using a credit card is 1.85%. This is a significant disincentive for reward seekers because many cash back credit cards give less than a 1.85% return on spending. As a result, using a credit card will cost you more in fees than you would receive in rewards.