September 25th, 2012

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I always get asked if paying taxes with a credit card is a good way to rack up points. My answer is always: it depends on your situation since there are fees involved using credit cards, so the value proposition decreases drastically. However, depending on the size of your bill, it is a quick and easy way to meet minimum spend requirements and hit any bonus spend requirements as well. In general, I probably wouldn’t do it if I was only earning regular miles for the purchase, but I recently used PayUSATax.com which charges a 1.89% “convenience fee” for using a Mastercard, Visa or Discover and I felt good about it because I met a minimum spend requirement and hit a spend bonus all in one fell swoop. Note: if you want to purely rack up miles and avoid fees, using a debit card like the Delta Suntrust card is the most lucrative option – Daraius at Million Mile Secrets successfully used his card to earn a bunch of miles and only paid $3.49!

PayUSAtax.com Options

Minimum Spending Requirements

I recently applied for four new credit cards: the Starwood Preferred Guest Credit Card from American Express, Starwood Preferred Guest Business Credit Card from American Express, Chase Ink Plus and the Citi Hilton Reserve and while the point payday was lucrative, I was collectively looking at spending $22,500 within 6 months. Coincidentally, I had a $10,000 tax bill to pay and while the best deal would be using my Suntrust Delta card, I decided to pay the $189 convenience fee and put the charge on my Hilton Reserve card, which accomplished the following:
– Instantly took care of the $2,500 minimum spend requirement which I needed to hit within 4 months, which got me two free weekend nights at any Hilton property in the world.
– Earned the anniversary free weekend night at any Hilton property for spending $10,000
– Earned 30,567 base HHonors points because the card gives 3 points per dollar spent.
– Achieved 1/4 of the $40,000 in spend needed to get Hilton Diamond status. I highly doubt I’m going to put $30,000 more spend to get Diamond, because I’m pretty happy with the Gold status this card automatically gives which entitles me to a 25% bonus on all base points, free internet, a dedicated reservations center, room upgrades, access to the executive club lounge and other welcome amenities.

So all together I got 3 weekend nights at top Hilton properties, one night in a category 4 hotel (30,000 points) and Gold status for a $95 annual fee + $189 in fees to pay my tax bill = $284. I was okay with that because I plan on redeeming my three free weekend nights at hotels that go for $400+ per night, which isn’t hard to do in cities like London.

Why Not Other Cards?

Initially I thought I’d put all $10,000 on the Ink Plus since that spend requirement was the most pressing at 50,000 points with $10,000 within 3 months, but I can normally spend that much with business expenses and I’d rather juice the card’s 5x spend category in office supplies/cell phone (I’m getting the iPhone 5) /internet/landline/TV and 2x in points per dollar on gas stations and hotels.

I have 6 months to meet the spends on my Starwood Amex cards and since I spend a lot at Starwood hotels and am now a 75 night Platinum member, I’ll earn a base of 6 Starpoints per dollar spent at Starwood hotels when using the cards.

Other Lucrative Spend Bonuses

Though I’ve already earned a “Travel Together” companion ticket on British Airways thanks to spending $30,000 within a calendar year on my British Airways Visa Signature Card, if you got in on the card during the 100,000-Avios bonus bonanza, you’d need to spend $20,000 within a year to earn that full 100,000 bonus, and then you’d be within striking distance of the spending threshold for the “Travel Together” ticket.

As I mentioned in this week’s Top 10 Airline Credit Card Perks, several airline co-branded cards offer both elite-qualifying mileage bumps as well as redeemable bonus miles for meeting certain spending thresholds, so paying your taxes with some of these cards could be a good way to get closer to your next status level or earn both the usual amount of miles on the spending plus thousands in bonus miles.

The Delta Reserve card gives 10,000 MQMs with first purchase and another 15,000 MQM’s when you hit $30,000 in spend within a calendar year plus an additional 15,000 MQM’s at the $60,000 mark during the same calendar year. The Delta Platinum Amex offers 5,000 MQMs with first purchase and then 10,000 MQM’s for $25,000 in spending, and another 10,000 MQM’s for $50,000 in spending, for a total of 20,000 MQM’s.

The only American Airlines card that helps toward elite status is the Citi AAdvantage Executive World Elite MasterCard which yields 10,000 elite qualifying miles after $40,000 in purchases each calendar year. The US Airways Mastercard offers 10,000 Preferred Qualifying Miles after cardmembers hit $25,000 in spending each year.

As always with the “is it worth it” questions in the points game, before deciding what to do, you need to take a long, hard look at your travel patterns and upcoming travel plans and then calculate your particular expenses and potential benefits to determine whether paying a 1.89% fee is worth it for your needs or not.

For me personally, I am putting my quarterly tax spending on cards where I need to meet a minimum-spend threshold in order to qualify for awards that vastly outweigh the 1.89% transaction fee.

Chase Sapphire Preferred® Card

Even after the introduction of the Chase Sapphire Reserve, the Chase Sapphire Preferred is still a fantastic choice if you want to avoid the Reserve’s $450 annual fee, earn 2x on all travel & dining and earn a 50,000 point sign up bonus.

Apply Now
More Things to Know
  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
  • Named Best Credit Card for Flexible Travel Redemption - Kiplinger's Personal Finance, July 2016
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
  • No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards
Intro APR on Purchases
N/A
Regular APR
16.49% - 23.49% Variable
Annual Fee
Introductory Annual Fee of $0 the first year, then $95
Balance Transfer Fee
5.00%
Recommended Credit
Excellent Credit

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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