The taxman always comes. And if you must, you must pay.
Ideally, it’s best to pay your taxes out of the money you saved from last tax season. However, what if life turned out in such a way that you did not save up enough money to pay taxes as planned? Don’t panic – you can pay taxes with a credit card, but before doing so, you need to weigh the pros and cons.
It is important to choose the right card that will not only pay your bill but also bring you the best rewards. Sean Bryant, founder of One Smart Dollar, said many people don’t know that you can actually make money by paying your tax bill with a credit card. First, it can be a quick and easy way to pay the minimum cost of a new credit card and get a signup bonus.
You should try to earn as many points as possible to offset the IRS online processing fee, otherwise you’d be better off not using a credit card. These pesky processing fees range from 1.96% to 1.98%, depending on which payment service you use. And that means that for every $10,000 in taxes, those fees will be between $196 and $198, which is a pretty significant price just to make a payment.
To help you make your decision, we asked experts to choose the best cards for paying taxes.
Capital One SavorOne Cash Rewards Credit Card: Best for a decent signup bonus
Why did we choose this: In addition to 3% cashback on many popular categories such as restaurants, entertainment and popular streaming services, Capital One SavorOne Cash Rewards Credit Card comes with a nice signup bonus of $200 if you spend $500 within three months. The card has no annual fee and also offers 0% APR on purchases and balance transfers for 15 months (then variable APR from 15.24% to 25.24%). Not only is the welcome bonus easy to get, but its 0% starting annual return comes in handy if you can’t fully pay off your taxes with one account.
Let’s say you pay your $1,500 tax bill and add an additional 1.98% processing fee. This means you pay $29.70 in commission, which is more than offset by the $200 bonus (and 1% cashback you earn).
pros
- Earn unlimited cashback
- Cash back for credit statement, check or gift cards
- No annual fee
- 0% initial APR on balance transfers and new purchases for 15 months (followed by variable APR from 15.24% to 25.24%)
Minuses
- It is not possible to exchange rewards for goods or flights.
Who should applyA: Anyone looking for a reliable everyday card to continue using even after tax season, as well as a decent signup bonus to cover those processing fees, should apply for this card.
Who should missA: If you have room in your budget for an annual fee, you can apply for a card that offers a larger signup bonus.
Chase Sapphire Preferred Card: The Best Card to Get a Big Sign Up Bonus
Why did we choose this: You can get an even bigger bonus with a premium travel card. Travel Rewards cards in particular have some of the biggest signup bonuses and the current signup bonus Chase Sapphire Preferred® Card this is an impressive deal. After spending $4,000 within three months, Chase will give you 80,000 points. Whereas Chase Sapphire Preferred increases your point value to 1.25 cents per point when redeemed for travel on the Ultimate Rewards portal, your welcome offer is worth $1,000 in travel.
That $1,000 should more than dwarf the convenience fees you pay on a typical tax bill. The card also delivers solid rewards: 5x points on Chase Ultimate Rewards travel, 3x points on restaurants, select streaming sites and online groceries, and 2x points on all other travel purchases. Even after tax season, this card will continue to benefit you.
pros
- $50 Annual Ultimate Rewards credit at the hotel
- 10% Anniversary Points Bonus
- Free annual DashPass subscription (activate by December 31, 2024)
- Multiple travel insurance (cancellation and interruption insurance, luggage delay insurance, etc.)
Minuses
Who should apply: Travelers who can pay the annual fee should definitely apply for this card. Anyone who has been eyeing this popular card should take advantage of this welcome offer right now.
Who should miss: Those who don’t travel much won’t find much use in this card or its welcome bonus. Also, if you prefer to exchange your points for a credit statement or cash, you should choose another card.
Citi Double Cash Back: The Best for Cashback Lovers
Why did we choose this: One good option if you like cashback is Citi® Dual Cash Card, which gives up to 2% cash back on purchases (1% on checkout and another 1% on checkout). This means you will receive $200 in rewards for every $10,000 paid in taxes. The card does not have a welcome bonus, but it does not have an annual fee, category restrictions, or cashback restrictions.
pros
- Transfer cash back to Citi ThankYou points (from $1 to 100 ThankYou points)
- Purchase Protection
- No annual fee
- Initial offer of 0% per annum on balance transfers for 18 months (then from 14.24% to 24.24% with a variable annual interest rate)
Minuses
- Rewards expire if the card is inactive for more than 12 months.
- No sign up bonus
Who should applyA: Cardholders who prefer simplicity and cash rewards should choose this card. This card will also appeal to those who have the funds to pay off their tax bill within a few months.
Who should missA: Consumers with little savings to pay taxes fast should choose a card that offers 0% APR on new purchases.
Wells Fargo Active Cash: The Best Way to Relieve Stress
Why we chose it: Wells Fargo Active Cash® Card is one of the most popular fixed rate cashback cards thanks to 2% cashback on all purchases. That, plus the $200 cash reward welcome bonus after you spend $1,000 over three months, will outweigh the convenience fee. To give you time to pay off your tax bill, you will also have 0% APR for 15 months on both purchases and balance transfers (which are completed within 120 days) up to its normal APR of 15.74%, 20.74 % or 25.24% (variable) is set.
pros
- No annual fee
- Cash back in the form of a check, credit statement, direct deposit or cash withdrawal
- Mobile phone protection up to $600 ($25 deducted)
Minuses
- It is not possible to exchange rewards for anything other than cashback
Who should applyA: If you didn’t have any tax savings this year and need time to pay them off, you’ll appreciate the card’s 0% interest rate on purchases. Those who have paid their tax bill with a high interest card may also like this card’s initial year period for balance transfers. Anyone who prefers to use the reward as a cash reward should consider this card.
Who should miss: If you are not satisfied with 2% cashback, no more and no less, you should choose another card. If you were hoping to use your credit card to pay for your vacation, you’d better keep shopping.
Comparison of credit cards for paying taxes
Plenty of other cards on the market fulfill many of the same goals we mentioned: great sign up bonus, good cash back and zero interest period. The cards mentioned above are just some of our favorites – see how they compare in this table.
| Map | Awards | Opening period April | Annual fee |
|---|---|---|---|
| Capital One SavorOne Cash Rewards Credit Card |
|
15 months for purchases and balance transfers, then a variable annual rate from 15.24% to 25.24% per annum. | $0 |
| Chase Sapphire Preferred® Card |
|
N/A | $95 |
| Citi® Dual Cash Card |
|
18 months for balance transfers (then from 14.24% to 24.24% with a variable annual interest rate) | $0 |
| Wells Fargo Active Cash® Card |
|
15 months for balance purchases and transfers (then variable annual rate of 15.74%, 20.74% or 25.24%). | $0 |
How to choose a credit card for paying taxes
The more you learn about credit cards, the more they start to mix with each other. It’s actually true – some cards have similar traits, but it’s their nuances that determine whether they fit your spending habits and your particular situation. Ask yourself the following questions to see which card is right for you.
- How high is your tax bill? If your tax bill isn’t too high, you can easily cover your processing fees with most of the signup bonuses offered out there. However, once your fees are over $200 (assuming your taxes are around $10,100), you may need to look for cards with bigger rewards or larger welcome offers to get your credit card to pay off.
- Do you prefer cash or travel? It’s an obvious choice, but a serious one. Those who love rewards in the form of cash or credit statement should simply purchase a cashback card, it will make it easier to keep track of your expenses and rewards. For those who love to travel, it’s definitely a good idea to purchase a travel card so that your credit card once your taxes are paid and its rewards continue to benefit you.
- Are you just looking for a loan and not benefits? If all the other bells and whistles don’t interest you and you just want to borrow some money, we recommend an introductory 0% APR card or a card with a low interest rate. This is especially useful if you are unable to pay the balance of your tax bill in full.
- How much savings do you really have? When it comes to taxes, now is not the time to lie to yourself. If you have little or no funds for taxes, applying for a card with a zero start period for new purchases will give you the opportunity to pay your tax bill little by little. Those with some savings can get away with a card with no initial period, although how much interest you can pay while you transfer your balance is a personal decision.
bottom line
Tax time can be very stressful, especially if you don’t have the cash to pay your bill. But paying Uncle Sam with the right credit card can help you breathe a sigh of relief. It can also help you buy time while you can reap great rewards. If you choose the right tax card, it’s a win-win situation.
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The editorial content on this page is based solely on the objective judgment of our contributors and is not based on advertising. It was not provided or ordered by credit card issuers. However, we may receive compensation when you click on links to our partners’ products.