The benefits of paying taxes with your credit card
If you charge your taxes to a credit card, you can earn rewards and get more time to pay off a higher bill tax. This method might be a bit more costly, but it can also be the most rewarding approach for some people. Here’s when it makes sense to use a credit card for taxes:
- Earn a lavish credit card sign-up bonus/welcome offer – The fact that there is something to earn when you’re spending money with a new card is the single most important aspect of using a credit card when you pay a sizable tax bill.
- Meet the credit card spending threshold – There are many credit cards that offer benefits that automatically trigger when you reach a particular spending threshold. This might be based on the calendar or a cardmember anniversary, but making large tax payments can really help you earn these rewards when that amount of spending can get to be out of range in other circumstances.
- Use multiple cards to maximize earnings – For example, let’s pretend that you have a $30,000 tax payment due. You can apply for both the Business Platinum Card from American Express and the Ink Business Preferred Credit Card. You put $15,000 on the Amex Business Platinum Card, and you’d have spent enough money to earn the 120,000-point introductory offer. Even more, given the fact that the purchase is over $5,000, you earn 1.5 points per dollar, which equals 22,500 points on the purchase itself.
- Get some extra time to pay your taxes – If you heard of TPG’s 10 commandments for earning credit card rewards, you know that the rule is never to pay interest charges.
The downside of using a credit card to pay your taxes
Even though we’ve taken the time to present all those benefits, using a credit card to pay your taxes can still be reckless, as the interest rate on most rewards credit cards is able to severely hurt your finances. So, if you can’t pay your statement balance in full because you’re charging taxes to your credit card, don’t consider this option.