Is It Rewarding If You Are Paying Taxes With Your Credit Cards ?

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Thinking of getting a little somewhat coming back on their year's taxes by paying through a rewards card? There are ads evidently across touting how you can quickly rack up some great rebates by working at so.

But before you jump on the bandwagon, be certain to crunch the numbers first. As tempting as it is to pile on the rewards points and air miles by charging your taxes, it is rarely as rewarding as you could think.

First off, you'll pay for the ease of paying your taxes by credit card with a 2.49% convenience fee. This fee isn't trusted by the Internal Revenue Service. It's charged by charge card aide providers such as Pay1040.com and Official Payments.

These companies act as intermediaries between taxpayers and the IRS. They validate charge card levels and expiration dates, obtain the authorization from card issuers and issue confirmation levels to taxpayers.

They then forward the payment to the IRS. And a tax payment listed as "United States Treasury Tax Payment" is charged to the taxpayer's credit card account, along provided a convenience fee.

Let's be on the look at some examples:

If you pay a $2,000 tax legal code on your prefered cash back rewards credit card, you'd wind up paying a $49.80 convenience fee. Let's say your card pays you 1% finances rebate for every dollar you spend with the card. By charging your $2,000 tax bill, you'd take home $20 cash back, but that is !no! as opposed to offset by the $49.80 convenience fee.

Paying an extra $49.80 to earn $20 does not construct a lot of sense does it?

And while you may earn virtually 50 cents cash coming back on the convenience fee, you're still shelling out an virtually $50 fee for roughly $20.50 in rewards. That's a difference of $29.30. And that's not so rewarding, is it?

What about paying your tax bill with your prefered air miles credit card?

Let's say you have a $3,000 tax legal code and you'll earn one air mile for most any dollar you credit on your taxes. Earning individuals 3,000 air miles ought to be nice, but you will in addition be charged a $74.70 convenience fee. Are you so desperate for a few thousand air miles which you would be willing to pay an almost $75 fee?

The heftier your tax payment the bigger the convenience fee you'll wind up paying.
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If you've got a $5,000 tax bill, you'd be charged $124.50 for the convenience of paying your taxes by credit card. Use a cash back card amidst 1 percent rebate and you'd earn roughly $50 in rewards, $51.25, if you count cash back earned on the $124.50 convenience fee.

Once again, the rewards just don't add up. Paying a $124.50 fee to get $51.25 in rewards isn't significantly of a deal.

Even an avid traveler eager to rack up air miles by charging a hefty tax bill may want to think twice.

Let's say you have got a $10,000 tax bill, and you really like the idea of earning 10,000 air miles by charging your taxes on your prefered air mile credit card. How do you feel about paying for a $249 fee? That's the convenience fee you will be charged for paying a $10,000 tax legislation on a credit card. For overly a great deal money, why not just book a domestic airfare yourself?

Another thing to consider when charging a tax bill with a rewards card is how fast you will be able to pay the balance in full.

If you're planning on revolving the balance from month to month, you will be hit investing in mortgages charges, further eroding any rewards you gain by charging your taxes.

Your best bet is to charge your taxes to a rewards card provided a zero percent introductory high amount for new purchases. The longer this teaser merde lasts the better - a zero percent put up for a year or more is able to be ideal.

Of course, the absolute best strategy is to pay off your card balance straightaway and hold off all finance charges. Also, bear in mind the IRS does offer various other payment options that may be more appealing.

This year's tax returns are already pretty rewarding, with many Americans set to receive tax rebate checks this spring. So you may want to pass on using a not-so-rewarding rewards card to pay your taxes!

Granted, your tax rebate check could be used to offset the convenience fee and any finance charges you may pay for charging your taxes on a rewards card. But is that really how you like to spend your tax rebate money?!? I don't know right about you, but I can think of a few thousand other ways that I'd instead use my check!

This article was originally published on CreditBloggers.com This article was written by Lucy Lazarony, a freelance personal finance writer based in Florida. Her articles hold been featured on MSN Money, Credit.com and CardRatings.com Prior to freelancing, she were effective as a constituents writer for Bankrate.com for seven years.

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