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Home / Taxes / Does It Make Sense To Pay Your Taxes With A Credit Card?


Pay Taxes with Credit CardWell, here we are just a few weeks away from the tax filing deadline. Unfortunately, some of us owe Uncle Sam a few more drops of our blood. The good ol’ Uncle doesn’t care how you make the payment, so long as you do not mail cash. For those who are living a cash strapped life, the possibility of sending a check on time seems impossible. Desperation may lead to making a poor decision as to how to pay those taxes and avoid penalties and interest. Despite being strapped for cash, you need to avoid paying your taxes with a credit card. Here is why.


Lets start where the government will start. The Internal Revenue Service (IRS) does not process its own credit card transactions. This is a common enough situation, but it will add to your tax burden. The amount that you will pay depends on the vendor that you choose on the IRS website. This is a link to the page ( showing the various vendors, their fees, and what type of payment they will process. The lowest fee to process a credit card is 1.88 percent with a minimum of $3.48.


If you pay your taxes with a credit card you will owe interest on the balance and the fees listed above. Depending on your situation, that may be any where between 12.99 and 23.99 percent. You can contact the IRS to find out how much any penalties and interest would be on your tax burden so that you can compare. In general, if you pay your tax balance in less than a year, you will save money by paying your taxes in installments.

Your Credit Score

Using your credit card to pay your taxes is going to lower your credit score immediately. I have mentioned in the past that thirty percent of your score is determined by your credit utilization ratio. So, no matter what your credit limit, the added balance is going to raise that ratio, lowering your score immediately. If you are unable to pay the balance by your next statement date, you risk being denied for any other lines of credit that you may need. This hit to your score will last for as long as you have a balance of any kind on your credit card/s.

In the end, it does not make sense form a personal finance viewpoint to pay any tax burden with your credit card. The IRS is willing to work with any taxpayer that contacts them. It may not (actually, it will most likely be somewhat unpleasant) dealing with them, but you should make the effort. While doing so, evaluate why you owe taxes this year. Can you change your filing status to avoid the situation in the future? If there is no way to avid owing each year, can you arrange quarterly payments toward your future tax debt?


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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