The Cons
The added interest – If you have a regular credit card with a normal interest rate, then you may find that paying taxes with that card quickly becomes expensive. Credit card interest rates have skyrocketed in the past few years.
It is also true that if you miss a payment on some types of credit cards, you immediately default to the highest annual interest rate on that card. Some of these interest rates can actually outpace the penalties that you would receive from the IRS for nonpayment.
Less peace of mind – Part of living a great life is knowing that you do not have financial obligations hanging over your head. Taxes is one of the largest obligations.
Even if you’ve paid off those taxes with a credit card, you may still find yourself in a bit of a dilemma if you have trouble paying off that debt within the next few months. It should worry you if you have not been able to pay off the debt in full before the following year’s tax payment is due.
Less credit for other big-ticket items – If you are using a substantial amount of your credit for taxes, then you have less of that credit available for other big-ticket items you may want. Paying off your taxes in cash may free up your credit for purchases that are much larger, such as houses, cars and boats.
Make sure to take into consideration all of your available options before quickly jumping onto using a credit card this tax season. There are pros and cons to the practice, and you need to plan ahead no matter what kind of financial tool you are using!
Lisa Kroulik is a freelance content marketing writer with eight years of experience. She has a special interest in helping readers make sound financial decisions and financial recovery topics. After having filed bankruptcy in 2008, Lisa took the opportunity to make a fresh start and learn from her mistakes. Today she has a credit score of 830 and no debt other than a mortgage.
