Tax time can be really stressful, especially if you don’t really have the money that you owe. In such difficult times, a credit card can come in handy but you should also understand all that comes with it.
Can you really use credit cards?
Credit cards aren’t directly acceptable so the government uses third-party services to allow that option to you. But all of them charge a convenience fee to use. In many places, you can pay through credit cards if you use tax preparation software which comes with an e-file as well as e-pay built into it.
How to pay taxes with credit cards?
- One of the easiest ways is to open up a balance transfer credit card and then transfer your tax payment requirements to it. A balance transfer offers an interest-free period which can last from a few months to a whole year. But balance transfer is only offered to people who have good credit.
- You can use a yearly promotional credit card rate of 0 percent to get a good deal. But keep in mind that you should make plans to pay that off within a year so that it really remains at 0 percent. This is because you are late on your payments, then the interest rate can skyrocket soon.
- You can also pay using a cash advance convenience check. But there’s a downside to this as there are steep transaction fees to pay along with high-interest rates as well.
Is it really worth it?
Remember that when you pay your taxes using a credit card then you are essentially shifting the debt from your country to your credit card issuer. As such you will have to pay interest on whatever balance you have. So if you only make minimum payments, then the tax bill will haunt you for years. Apart from his keep in mind that there are transactions fees which you are liable to pay. One way to navigate this web is to use the credit card plan that works for you.
Always read the fine print on the credit card plan before going for it. You might think that a credit card tax payment has saved you, but you might have to end up paying a lot more if you are not careful.