Why Paying Your Income Taxes with a Credit Card Is a Rip Off
If you own your own business or have not been deducting enough from your paychecks each week, you will probably owe some income taxes when tax time rolls around. This is never fun, and if you do not have the money in your checking account right now, you might be tempted to pay the taxes with your credit card. A word of advice: dont.
When you owe income tax to the federal government or the state government, they are aware that the amount you owe may be over the amount you have access to at the moment. They prepare for this eventuality by allowing tax payers to file for an extension to pay their debt. You can arrange for a payment plan to be in effect for the total amount.
You will of course pay interest on the amount that you are putting off, but the interest rate that the government charges is relatively low. With state governments this number will vary, so check with your local state tax office. But for the federal government, the current rate of interest on unpaid taxes is seven percent, which is the federal short-term rate plus three percent.
Now consider your credit card. Most credit...
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