Tax season is coming up, which means some will have to shell out a hefty chunk of cash to the government. That always stings, but you can make it sting a little less if you have a decent rewards credit card.
Before we go further, we should point out a very critical disclaimer: You should only do this if you’re in a situation where you can pay your taxes entirely up front with cash. Don’t charge your taxes to a credit card and then pay it off slowly. That will cost you in the long run. However, if you already have the money to pay your taxes, read on.
As personal finance site 20 Something Finance explains, the IRS allows payments via credit card for a fee. The fees are in the area of 2%. The lowest the site found was 1.87%. However, if you have a rewards card that offers a better return, you can make a little profit.
If your card gives more than 2% cash back, then anything above the fee that the IRS charges is free money in your pocket. It’s also a decent chunk all at once, which means you might be able to get enough to buy a nice meal, if you’re paying enough. Of course, once you’ve paid the tax man, you should probably schedule that credit card payment to pay off your balance as well. It’s not a huge difference, but it’s at least a nice psychological benefit that can make you feel less annoyed about paying the tax man.
How to Pay Taxes with a Credit Card (and Profit) | 20 Something Finance
Photo by TaxRebate.org.uk.