Using a credit card to pay your taxes is becoming the norm. In fact, credit card and debit cards are already the most common payment method for taxes -- more people use them than those who electronically transfer from bank accounts. According to the IRS, the use of credit and debit cards to pay taxes increased 54% last year, and it's predicted to increase even further this year.
To further encourage those to pay their taxes with a credit card, credit card companies are going into advertising overdrive with campaigns specifically targeted to get people to pay their taxes with their credit card. This includes a Chase offering to double the mileage points on the United Mileage Plus SignatureVisa card for amounts paid toward taxes, plus a host of similar bonus offerings from other credit cards companies.
But while getting bonus rewards may at first sound appealing, when you look closely you'll find that these offers aren't nearly as good as they first sound.
The biggest problem is that when you pay your taxes by credit card, the charge comes with a 2.49% surcharge to third-party companies that process the transaction. Most people find this charge a surprise because processing surcharges are usually not allowed by credit card companies. This surcharge effectively wipes out any bonuses that the credit card companies offer and often means you'll lose money even with the added promotion incentives and if you pay off your credit card on time and in full. The financially smart move is to pay by another method if possible.