Should I pay my tax bill with a credit card?

For those who will have to pay money on their tax returns, a big question usually follows once the amount owed is determined: Should I put this tax bill on my credit card?

It all depends on one’s situation and preferences.

Paying taxes with a credit card usually comes with fees of roughly 2%, so if you owe $500, there will be a $10 credit card fee. If you owe $20,000, there will be a fee of $400.

There also can be a limit on how often you can make payments with a card, which can be viewed by clicking or tapping here.

But despite the fees, sometimes it can be beneficial to charge your tax bill on a card.

Here are five pros and cons, according to Finder.

5 pros

• It helps provide time to pay off taxes. Instead of paying the bill all at once, putting it on a credit card can help pay it off over a longer period, as long as the interest rate on the card isn’t too much higher than an IRS payment plan.
• The minimum spend for a signup bonus can be potentially be reached. Normally, signup bonuses can be achieved by spending a minimum amount on a card. If the processing fee from the IRS doesn’t erase any potential gains from the bonus, then charging your tax debt can help you reach the bonus.
• Rewards can be achieved. As long they are worth more than the fee, you can gain rewards on a credit card, such as airline miles, points or cash back.
• Payments can potentially be deferred. Those with a 0% intro APR credit card can defer payments, which allows that money to grow in a savings account as the team bill is spread out.
• It can help reach a spending threshold. Paying for taxes with an airline branded credit card can help someone reach a status that will result in rewards such as bonus miles, class upgrades or lounge access.

5 cons

• You might not be able to afford the fee. If this is the case, a payment plan with the IRS would be better instead of a credit card.
• Keeping up with the payments can be a problem. If paying for taxes only adds to the debt on a credit card, that will make a financial situation worse, not better.
• It can hurt your credit score. A big charge on the credit card can be a problem for your score. That can affect attempts to open other lines of credit for things such as a car loan or mortgage.
• It can hurt your credit utilization ratio. Similar to harming your credit score, a tax payment can take a big portion of your credit line by raising your credit utilization ratio.
• It can risk maxing out a credit limit. If a tax payment does this, penalties will incur and the ability to make emergency purchases will be negated.

This story was first published in 2021. It has since been updated.