Pay Taxes with a Credit Card: Whenever the time to pay taxes approaches, every individual struggle to pay them on time without incurring any hassle.
In the present scenario, where paying bills and taxes in cash has become difficult, thus everyone seeks for different options to pay their taxes.
Now, the question arises, is it possible to pay taxes with credit cards? Or, should you prefer to pay your taxes with credit cards? Well, for some, this idea would be great as they will get a chance to win some reward points.
On the contrary, there are certain people for whom paying taxes through credit cards is not a good option because of extra processing fees other charges involved in the transaction.
Alright, to help you out in taking the best possible decision, here we have explained in detail the pros and cons of paying taxes with credit cards.
Advantages of Paying Taxes with Credit Cards
Undeniably, your credit cards have a large amount of limit that you can use to pay your bills and taxes. Also, the benefit of paying off from credit cards is that you have to pay the amount over a period of time as per our credit card terms and conditions.
Below listed are the prevalent advantages of paying taxes with credit cards that you must read!
1. Reward Points
Every credit card company has some offers for their customers if they pay taxes from their credit card. Either you will get an offer to avail reward points or maybe cashback offers. They have some of the best offers and lucrative reward points for their customers to offer if they pay from plastic.
Nevertheless, it’s equally important to meet the initial requirements and most importantly, their minimum charges before they reward you! Well, if you pay your taxes with a credit card, then ultimately, you will get an opportunity to earn reward points on your payment, which is not a bad idea though!
2. Quick Process of Payment
You cannot deny the fact that making payments through an online process is quite easier and quick. With so much convenience and instant confirmation on receiving the payment, you can quickly pay your taxes with a credit card. Once the amount will be debited, you will get a confirmation mail along with an SMS on your registered mobile number to ensure the security of payment.
3. No Extra Form Filling
The prominent plus point of paying taxes with a credit card is that there is no additional form filling. Even if you don’t have the cash to pay your tax bills, then the credit card is a great option to pay your taxes before the deadline without even worrying about filling the long forms. Plus, some credit card companies that let you pay your taxes even after the deadline, which is considered as an exemption!
Disadvantages of Paying Taxes with Credit Cards
Besides its advantages of owing the reward points, cashback, and additional offers, there are some disadvantages if you pay taxes with your credit card.
Below listed are some considerable disadvantages to paying your tax bills by credit cards that you should not ignore!
1. Higher Processing Fee Charges
If you are planning to pay your taxes with credit cards, then you must know the fact that the payment processors charge a higher amount of processing fees. Of course, the payment processors have their own charges. But if you pay your bills and taxes with credit cards, then it tends to be high.
Even if they provide lucrative offers of reward points, then it is baseless as the processing fee charges will mostly outweigh all the rewards ultimately!. Therefore, it is advised to check the processing fee charges of the payment processors before you pay your tax bills with your credit card.
2. High-Interest Rates
There is a deadline to pay the taxes, right? So, if you pay your taxes with a credit card, then you must ensure that you pay it before the due date to prevent high-interest charges. Adding on to it, you have to make sure that you pay the full amount to avoid any interest charges.
3. Adverse Effects on Credit Score
Every credit card has its available limit and if the cardholder, in any case, uses the high percentage of the credit available, then it can negatively impact the credit score. If you utilize your credit balance up to 50%, then you are at a higher risk of credit utilization. It will also impact negatively on taking out a loan in the future for any purpose.
For example – Assume that your credit card has a limit of 50,000. And your total amount to pay taxes is nearly 25,000 to 28,000, then it is obviously 50% or above the credit limit of your card, right?
If you will utilize 50% of your credit card limit, then it will not only impact your credit score but also it will be quite difficult to make any purchase or payment in the future. If you don’t have enough balance on the card.
Therefore, it is essential to calculate your credit score before you plan to pay your taxes with credit cards.
Credit card is a necessity these days but as a cardholder. It’s your responsibility to use it wisely to make it a useful asset in the long run. Before you plan to pay your tax bills with credit cards, you must check your credit score and payment histories to ensure whether using it is a good option or not. If your credit score isn’t good as expected, then it is better to avoid making payments through credit cards as it will only affect your credit score.
Furthermore, you have to make sure that the payment that’s subject to credit card agreement will be in balance has to be paid over a period of time! Thus, it is vital to know all the advantages and disadvantages of paying your taxes with credit cards so that you can plan it well in advance!