Paying taxes with your credit card is an option if you have pending taxes to be paid. Credit card issuers allow you to pay your taxes at one go with your credit card with the provision of you repaying the amount later at the end of the month.  

If the taxes which needs to be paid is a larger amount, you can pay it off with a credit card and choose to pay back the bank in installments or EMIs.

What Kind of Taxes Can Be Paid with Your Credit Card?

You can pay your annual tax returns with your credit card. This is the amount which will be due when you file your tax returns between the beginning of the year to the middle of April. If you are self-employed or work in the freelance sector, you will be able to pay your quarterly estimated tax payments as well. Some cities, states as well as countries allow you to pay your income and property taxes with your credit card.  

However, in order to pay your taxes with your credit card, you must keep in mind the benefits and the disadvantages which come with it. To know more and understand the terms and conditions, it is advised to consult with your bank or credit card issuer about paying your taxes with your credit card. 

The Benefits of Paying Taxes by Credit Card

In order to pay off your taxes with your credit card, you need to have enough credit limit available. 

Here are a few benefits to paying your taxes with your credit card. 

Rewards:  With any credit card, you are entitled to certain rewards and offers. Especially if you hold a rewards credit card, you can earn a wide range of rewards on your transaction done to pay your taxes. However, it is important to keep a check on the terms and conditions your card offers on the types of purchases or minimum charges.

Easy Procedure: You’ll be saving more time on paying your tax bill as you will not be required to fill various tax forms. Once you add your taxes to your credit card expenses, the credit card you hold will let you continue paying your tax bill after the deadline of 15 April. 

Avoiding Interest: If you hold a credit card which has a zero-interest rate on purchases, you can save money on interest. However, this type of credit cards comes with certain terms and conditions so if you wish to pay your taxes with the credit card, you should consult with a bank official.  

Drawbacks of Paying Taxes by Credit Card: Even with several advantages of paying your taxes with your credit card such as the additional tax to pay your taxes as well as the rewards earned, there are a few disadvantages of paying your taxes with your credit card.  

Paying interest on Your Tax Amount: The tax amount which you will you wish to pay with your credit card will be subjected to interest. The interest charged will increase, the longer you take to pay your tax amount in full. It is advised to use a credit card which has a lower rate of interest or has an offer with a promotional interest rate. This will result in the reduction of the monthly amount you will be paying as finance charges.

Convenience Fees: There will be convenience fees charged on your credit card to pay your taxes. Usually, banks and credit card issuers charge 2.49% of your tax bill as convenience fees if you pay your taxes with the credit card you hold.

Debt Cannot be Dissolved: The debt which you will have accumulated by paying your taxes with your credit card cannot be dissolved or declared as bankrupt. This means that if you face any kind of financial trouble in the future, you will still have to pay off this debt in full.

Affecting Your Credit Score: Paying off your taxes with your credit card might result in your card issuer thinking that you’re a risk. Credit card issuers and banks often form the impression that you are facing financial trouble if you choose to pay your taxes with the credit card they have issued. If you can afford to pay your taxes, you would not need to pay it with a credit card. This might result in the bank increasing your interest rates, decreasing your EMI tenure or they can also cancel your card if they wish to.  

It is important to assess all the advantages and disadvantages revolving around paying your taxes with your credit card. As mentioned before, it is strongly advised to consult with a bank official before taking the decision of putting your tax debt on your credit card.