Comments on: Don’t Pay Your Taxes With Your Credit Card!

By: Ray

Ray — Mon, 14 Apr 2008 17:17:24 +0000

Easy Money, I used my Citi CashRewards card which pays you back 5% for the first 3 months on anything you spend it on. Let’s see 2.49% from 5% = 2.51% profit.

I’ll pay off my credit card like I do every month and I just made 2.51% for using my credit card. I love how people are so negative with the possible negative events which could happen.

Obviously, If I don’t pay my credit card then I would be charged interest… really? I had no idea that would happen. – This is no different than anything else in life. If you know the rules and you pay your bills and read the fine print you will be fine. If you can’t function outside the box, then don’t use your credit card. I know how to use my credit and milk them for all the free rewards and 0% money they will throw at me.

This is a great deal if you can make more than the 2.49% fee, otherwise don’t use your CC.

By: The Sim

The Sim — Mon, 14 Apr 2008 17:13:09 +0000

ps, sometimes you even get cashback rewards on purchases even for the 0% intro rate cards, so this can be an even larger incentive.

By: The Sim

The Sim — Mon, 14 Apr 2008 17:10:41 +0000

I paid my taxes last year with a 0% purchase credit card, and intend to do it again this year. I have a card with sufficient line of credit with 14 months of 0% interest introductory rate remaining. I will pay minimum payments each month, keeping the cash in an online savings account earning ~3%, then pay it off in one lump sum at the end (it was better last year when you could get 4.5%). After taxes on the earned interest (!), it works out to pretty much 0 gain or loss for paying your taxes this way, but the benefit of not having to actually pay out most of the cash for an additional year (always nice to have cash on hand in case of emergency, if it doesn’t cost you anything). To my knowledge, these transactions are considered ordinary purchase transactions by the credit card companies (this was my experience last year), and will be treated as such on your bill. The extra 2.49% is simply included as part of the purchase price by the payment processor.

By: Dieselmania

Dieselmania — Fri, 11 Apr 2008 05:08:49 +0000

amex gave a promotion earning you double MR points for paying your taxes. $1100 = 2200 MR points = 2200 airlines miles. for an average ticket of $400 (25000 miles) your 2200 miles are worth $35.2 which is more than the $27.39 fee to pay your taxes with the card. It all depends on how you will be using those points you earn. in your case it was a small benefit. Compare to people who have to pay 20K to 30K in business taxes.

PS. you are still earning interest on your $1100 until you pay your amex card 30 days after april 14th.

By: Ryan

Ryan — Fri, 11 Apr 2008 01:50:11 +0000

Trent, I agree. Most rewards cards don’t pay more than 2-3% unless it is an introductory rate, or for certain purchases such as gasoline or grocery stores. The only other way I can think that this would be a viable option would be if you had serious cash flow problems and a credit card with a 0% introductory offer for several months. Even then, I wouldn’t want to chance it.

By: Trent Hamm

Trent Hamm — Thu, 10 Apr 2008 12:46:06 +0000

The only reason to consider doing it is if you get a reward of some sort that actually exceeds the value of that 2.49%. If you have a credit card that actually does this, you’re quite lucky.

By: PT

PT — Thu, 10 Apr 2008 04:15:56 +0000

Yeah, sad for the person who resorts to using this method.

By: Ryan

Ryan — Wed, 09 Apr 2008 10:26:12 +0000

Frugal Dad,

Even then doing it for the rewards would be a stretch for most people. Still, there may be a few cases where it is worthwhile.