In most countries, people have to pay taxes to the government. There are different ways to pay these taxes. In the modern era, most people choose to pay taxes through their credit cards. But there are some advantages and disadvantages of paying taxes with credit cards. If you have a credit card and you want to pay the taxes with it, make sure you know the pros and cons thoroughly.
- 1 Benefits Of Paying Taxes With Credit Cards
- 2 Disadvantages Of Paying Taxes With Credit Cards
Benefits Of Paying Taxes With Credit Cards
The top benefits of paying taxes with a credit card are as follows:
1. Enjoy The Flexibility In Case Of Repayment
As per the terms of the credit card company, you can pay your taxes on a flexible approach over time. This way, you can reduce stress as you can divide payments. On having more than one credit card, you can split the amount of taxes on both credit cards and pay accordingly.
Splitting taxes can help you to keep both your credit cards active and enhance your credit score over time. So, your creditworthiness increases a lot.
2. Chances to Avoid Interest
There are chances for you to avoid interest on paying the taxes regularly through your credit card. However, you should check the terms of the credit card. Try to avoid paying taxes with such a credit card that does not provide any cut-offs on your interest. Expect most credit card companies to give you cut-offs on interests on having a decent credit history.
3. Get More Rewards
There are only a few credit cards that do not come with the rewards. You can get a lot of rewards from a credit card if you regularly pay taxes from it. There are different types of credit card rewards and you should be aware of the particular reward that your credit card can provide.
Firstly, you can get periodic cashback rewards from your credit card on paying the taxes regularly. Secondly, travel credit cards can give miles or discounts on gas or petrol. Thirdly, credit cards can give redeemable points that you can use during shopping.
Disadvantages Of Paying Taxes With Credit Cards
Here are some disadvantages of credit card tax payments:
1. Paying More Interest
If the introductory rates are high for a credit card you might have to pay more interest to the credit card dealer. The best you can do is avoid going into many tax instalments and make sure you are paying the taxes on time.
Although, you can carry some balance to the following month, do not let it increase to a higher level. In such cases, your credit score might drop drastically, and the creditworthiness would diminish. You might not be able to catch the pace of the dropping credit scorer and end up being a bad credit card user.
2. Added Fees
In case of paying taxes through a credit card, you will have to give a processing fee. This processing fee can at times be more than the actual amount of tax. So, it can be a tough pocket-pinch for you.
Moreover, depending on the dealer, you might have to pay a convenience fee. Hence, check if it is beneficial for you to pay the taxes by credit card.
3. Late Payments
Late payment is one of the most dangerous issues that you might face in case of paying the taxes by a credit card. There is always a chance of facing a legal problem if you fail to pay a huge amount of tax on time. So, the best thing you can do is to set up a strategy for paying the taxes.
Try to consider your overall expenses and then decide whether it would be comfortable for you to pay the taxes with a credit card.
4. Damage to Credit Score
We have already mentioned the situation when your credit score can get damaged due to the irregularity in the credit card payments. You might not get offers and rewards on your credit cards and neither choose to take a new credit card. This can happen as the level of credit utilization increases.
You should be aware that the same thing happens if a user takes a loan on the credit limit. This is the reason why the experts might suggest you not to pay taxes or take loans through your credit card.
The monetary needs and style of expense are largely different from one another. So, it depends fully on the user if he/she is sure to pay the taxes through the credit card. You must take a credit card considering some leading factors like the dealer, interest rate, and rewards to ensure comfortable usage.
If you are more concerned about the rewards of the credit card, you can start paying taxes through it. However, a proper strategy can help you in the long run.