Paying Taxes With Credit Cards is Seldom A Great Idea

Use Credit Cards as a Last Resort To Pay Taxes

We found a lot of reasons on Yahoo Finance to resist the urge to pay taxes with a credit card. Of course the IRS disagress with their list of Benefits of Paying Taxes with a credit card. But of course, the IRS knows that the more financing options they offer, the more chances they will have to collect your tax bill.

For one thing, if you use a credit card, you probably do not have the cash to pay the bill. That means you will be hit with interest charges every month. So you have automatically given yourself a tax penalty even when the IRS did not! If you owe a large sum, and cannot pay it, consider the IRS financing option. Even though they do charge a setup fee of $105, their interest rate is probably lower than the rate you would get if you had to use a charge card.

Creative Use of Airline Miles or Cash Back Credit Cards

Now I did know one guy who did have the moeny to pay his bill, but used a card with airline miles. He payed of his $10k tax bill with this card, and then got himself airline miles, and turned around and paid the bill promptly so he did not run up interest charges. I guess that is some creative use of credit, but I think that is a more unusual case. I guess some cash back cards could offer a similar opportunity to benefit.

The IRS also Has Financing Options

However, most people do not benefit from charging their taxes, and the companies that offer credit make a lot of money from this. If you can scrape up the cash to pay off the tax debt, it is probably better unless you have some fantastic investment that is paying off better then the credit charges. If you can benefit by some credit card scheme, and can get your bill paid off promptly, you may be doing alright to use credit too. But for most people, coughing up the dough, or negotiating an IRS financing option is a better deal.

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