Pay your taxes with plastic and you'll pay the price. No doubt you use a credit card for the great majority of your purchases. This comes with obvious advantages -- if you pay off the bill in full each month.
Credit cards are accepted for fast food, cell-phone bills and even for church donations these days.
So it's no surprise that you can also use plastic to pay your federal taxes.
With tax season approaching, those who haven't set enough aside from their earnings can find that they don't have enough cash on hand to cover their tax bill.
One solution is to put the taxes due on a credit card. The Internal Revenue Service even has a list of features and benefits of paying your taxes by credit card, which include convenience, safety, availability, security, quick confirmation and the chance to gain rewards.
But paying your taxes by credit card in most cases is a poor option, says Curtis Arnold, founder of CardRatings.com. "The only time it makes sense is if you just don't have the money to pay for your taxes and have exhausted all other financing options."Many people see paying by credit card as convenient, but it costs money. Unlike retailers that absorb the credit-card charges levied by the bank when you pay by credit card, the IRS has an exemption from this policy.
So guess what? You end up paying the fees.
That comes to a minimum of 2.49% of your payment. If you owe $10,000 in taxes, you would be charged $249 when using a credit card. Even if you are able to put your taxes on a 0% interest credit card, you will still be charged this fee for using a credit card.
If you place the tax you owe on a typical credit card, the damage can be even more, Arnold says. "You are 2.49% in the hole out of the gate," he says, "and if you aren't able to take advantage of a 0% promotional APR, the interest charges could quickly be devastating."