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Why You Should Not Pay Taxes With a Credit Card!

Why You Should Not Pay Taxes With a Credit Card?

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Advance Personal Finance

Advance Personal Finance

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There are multiple venues that allow you to pay your taxes with a credit card. This is especially if your taxes are prepared online. Your tax payments have a deadline of mid-April each year and must be sent in prior to this period, in order to avoid penalty. This research article will give you 3 things to consider as to why you should not make tax payments with a credit card.

*High Processing Fees

With every credit card payment, there are payment processing fees. The United States tax code prohibits the government from paying these fees. This makes it your responsibility as the taxpayer to do so. The fees can range from 1.87% to 2.35% of the total payment. This amount can be extremely expensive if you have a large tax payment.

*Affects Your FICO score

If you have a large tax payment that is close to your credit card limit, this could essentially wipe out any credit remaining for other essential purchases. This could be a negative on your FICO score which is based on the overall amount that you owe for each of your credit accounts. Having a lower FICO score weighs heavily on new purchases of a home, car or other major purchases.

*High-Interest Rates

Unless you have a 0% interest rate credit card, then it would be best to consider making your tax payment another way. Many credit cards offer interest rates between 18% APR and up, which leads to more expenses from out of pocket. These high-interest rates can catapult your tax payments into installment payments that you would be making for years to come.

If you must pay with a credit card, then make sure that you are able to pay the entire bill. This is the best way to ensure, that you are spending the least amount of out of pocket expenses for your tax payment.

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