Would it make sense to use a credit card if:
- I have money saved up to pay taxes I may owe this year
- My credit card (American Express Starwood) offers points per dollar.
- If I pay $5000 I get 5000 points = 2 nights free @ some four points sheraton hotel!
- I pay my tax - as soon as the IRS charges my account, I pay off the bill.

You just need to do the math. The $5000 is going to cost you $124.50 in fees to third party companies to process the charge (you can actually get the third party charged reduced a bit if you do your taxes through H&R Block) - so if the 2 nights are worth the $124.50 then it could be an option.

I didn’t really get what you were talking about at first with the processing charge. Now I understand that I would have to pay that charge…so that makes it an easy call for me.

I’m glad you wrote this post as I did a little while ago linking to this post. Sometimes it’s more than aggravating to see people fall for this type of stuff by the credit card comanies.

I hope they take our advice and do anything they can not to go that route.

I think it is important for people t understand exactly what credit card companies are proposing. I guess for some people it could be a good thing, but I think that in general it is something that should be avoided at all costs!

Sharon

As someone who once owed the IRS about $5K in back taxes, it’s better to work out a payment plan. The rate that I got from the government in 2002 was much better than the rates out there for credit cards, plus the debt did not turn up on my credit report. The rates are also fixed, or change only once a year they way they do with student loans, so you aren’t subject to monthly variability. The Fed Open Market Committee meets every 6 weeks, so if someone did charge their taxes to a variable credit card, that’s a pretty silly idea.

Of course if you default, you have to pay it up all at once, or they can garnish your wages.

Carnival of Personal Finance

Welcome to this week’s edition of the Carnival of Personal Finance. As a summary of each piece, I’m listing each author’s reason for submitting the post to the carnival (for those that submitted one) and/or a bit of the post

The solicitation we recieved stated that a rewards member can get virtually 1 point for every dollar of taxes paid through their service. You can even pay your 2.49% fee with your points. Each dollar of the fee equates to 200 points with AMEX. So, a $10,000 tax bill would generate 10,000 points. The fee is $249.00 x 200 points = 49,800 points. So I just paid 49,800 points for 10,000 points. Hmmmmmm.

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