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Update: Some offers mentioned below are no longer available. View the current offers here – The Platinum Card from American Express, Citi AAdvantage Platinum Select World Elite Mastercard, The Amex EveryDay Preferred Credit Card from American Express, Platinum Delta SkyMiles Credit Card from American Express, Citi Hilton HHonors Reserve card, Delta Reserve Credit Card from American Express, Hilton Honors Surpass Card from American Express
Tax Day is less than two weeks away, so if you haven’t decided how to pay your taxes yet (or don’t know what your taxes will even be), it’s time to make some decisions. One of the questions I get asked most often this time of year is whether paying taxes with a credit card is a good idea. Sure, you can rack up a lot of points and miles, but often there are high fees associated with paying this way, since tax payment services will charge you with fees between 1.87-2.35% to use a credit card.
Even with those fees, using a credit card to pay your taxes can sometimes still make sense, as many cards offer bonus points or perks if you hit certain spending thresholds. Before we get there, though, here’s a quick reminder of the tax payment services you can use, and what each one will charge you to pay your taxes using a credit card.
Tax Payment Services For Credit Cards
Here is the official government list of approved tax payment vendors, and here are the rates they charge for using a credit card to pay taxes:
- PayUSATax.com: 1.87% for credit cards
- OfficialPayments.com: Generally 2.35% when using American Express, MasterCard, Discover or Visa
- ChoicePay: 1.88% fee for credit card tax payments
- Pay1040.com: 1.87% when using credit cards including American Express, Discover, MasterCard and Visa.
- Business Tax Payment: 1.87% fee when using credit cards
- Value Tax Payment: 1.87% on credit cards
Any service you use is going to charge you a percentage of the total amount in order to process a tax payment via credit card. However, despite the cost, this can still be worthwhile if you plan on using one of these cards.
Best Credit Cards To Pay Your Taxes With
Clearly the number to beat when looking for return on spending is 1.87%, since that’s what most of these services charge you to use a credit card to pay your taxes. That’s not too tall of a task depending on how you value your points and miles, and which of these spending/earning factors you prioritize. Here are several to consider, and the top 13 cards overall that I would recommend using to pay your taxes and reap rewards that outweigh the credit card processing fee.
Sign-Up Bonus Spending Minimums
One scenario where it makes sense to use a credit card to pay taxes is if you’re trying to hit the minimum spending requirement in order to earn the full sign-up bonus on a new credit card. Though just earning the points/miles from the spending alone might not be worth a 1.87% fee, earning tens of thousands of extra points probably is. Here are three current bonuses to consider that would make paying the fee worthwhile.
Ink Plus Business Card from Chase: This card has recently offered bonuses of 60,000 and even 70,000 points, but the current public offer is for 50,000 points when you spend $5,000 in the first 3 months. You’ll earn just 1 point per $1, but if paying your taxes helps you earn the sign-up bonus, then you’ll still get a pretty good return. Let’s say you pay $5,000 in taxes and earned 55,000 Chase Ultimate Rewards points total. You’ll pay $93.50 in fees. However, I value Ultimate Rewards at 2.1 cents apiece, so you’ll earn $1,155 worth of points.
Citi / AAdvantage Platinum Select World Elite Mastercard: This Citi AAdvantage card currently comes with a sign-up bonus of 50,000 American Airlines miles when you spend $3,000 in the first 3 months, and the annual fee is waived. I value AAdvantage miles at 1.7 cents apiece. Supposing again that you paid $5,000 in taxes using your new card, you would end up paying the same $93.50 in fees, but you’d earn 55,000 AAdvantage miles, worth $935 in my book. That’s literally 10x the value of the fees!
The Platinum Card: The current public offer for this card is 40,000 points when you spend $3,000 in 3 months. However, some people are getting targeted offers through the CardMatch Tool of up to 100,000 points after spending $3,000 in 3 months. If you spent $3,000 on taxes using this card, you would pay $56.10 in fees. I value Amex points at 2 cents apiece, so with the 40,000-point bonus, you’d be earning $860 worth of points. If you qualify for the 100,000-point offer, your earnings go through the roof to $2,060.
Everyday Spending Bonuses
Some cards earn more than a single point or mile per dollar you spend on them, and depending on how much you value those points or miles, you can end up earning a far better rate of return on your spending than the fee for using that credit card.
Amex EveryDay Preferred from American Express: This year-old Amex card earns category bonuses at merchants like gas stations and grocery stores, and while it earns just 1 point per $1 on most other purchases, if you use it for more than 30 transactions within a single statement period, you get a 50% bonus on all points you earned during that period. So if you hit the transaction threshold, you’ll be getting 1.5 Membership Rewards points per $1 you spend on taxes. I value Amex points at 2 cents apiece thanks to their transferability, so you’d be earning 3 cents per $1 spent, for a net return of over 1%.
Barclaycard Arrival Plus World Elite Mastercard: With this card, you earn 2x miles per $1 on all purchases, and you can redeem miles for travel purchases at 1 cent apiece, plus get a 5% mileage refund, so in effect, you get a return on spending of 2.11%. If you pay through a service that charges 1.87% for credit card tax payments, then you’ll come out ahead.
Spending Threshold Bonuses
Several of the top travel credit cards out there award cardholders with value-added benefits for hitting certain spending thresholds within the calendar or cardholder year. These benefits range from bonus points to airline elite qualifying miles to annual free hotel nights.
Here are three of the best cards to consider paying your taxes with for this option.
Citi / AAdvantage Executive World Elite Mastercard: This elite card from Citi and American Airlines awards cardholders with 10,000 elite-qualifying miles after hitting $40,000 in purchases each calendar year. That’s a steep number, but if you think you could get there, it might be worth putting your taxes on this card in order to earn the EQMs and make status qualification (or requalification) that much easier. That will help you get potentially valuable perks like systemwide upgrades (which can be worth thousands of dollars each) and mileage bonuses.
Delta Reserve Credit Card from American Express: Delta’s top-tier co-branded credit card (it comes with SkyClub access) earns 10,000 award miles and 10,000 MQMs with your first purchase, another 15,000 MQM’s when you hit $30,000 in spending within a calendar year, plus an additional 15,000 MQM’s at the $60,000 mark during the same calendar year. That can be a huge help toward elite status qualification, especially given Delta’s relatively new spending requirements for elite status qualification. The Delta Platinum Amex also offers 35,000 award miles and 5,000 MQMs when you make $1,000 in purchases in the first 3 months, another 10,000 MQMs for $25,000 in spending, and yet another 10,000 MQMs for $50,000 in spending, for a total of 25,000 MQMs.
Citi Hilton HHonors Reserve card: This Hilton card earns a free weekend night at $10,000 in spend and Diamond status at $40,000 within a calendar year (like the Hilton Honors Surpass Card from American Express, which also offers the opportunity to earn Diamond status). A moderate amount of spending can earn you a free night, which you can maximize at a top-tier property like the Conrad Maldives (where room rates can easily top $1,200 per night) or the Grand Wailea on Maui (where room rates are regularly above $500 per night). Plus, it gets you closer to earning top-tier Diamond status with Hilton as well.
Southwest Rapid Rewards Premier Credit Card: With the Premier version of the Southwest credit card, you can earn 1,500 Tier-Qualifying points per $10,000 you spend in a calendar year (up to 15,000 Tier-Qualifying points annually). You reach A-List elite status with 35,000 Tier-Qualifying points, and A-List Preferred status with 70,000 Tier-Qualifying points, so you could put a big dent in your qualification requirements. Also, Rapid Rewards points you earn through purchases on a Southwest co-branded credit card also count toward earning the Companion Pass, which requires 110,000 Qualifying points in a calendar year. If you earned the pass now, it would be good through December 2016 – that’s 20 months of free flying for your +1.
United MileagePlus Explorer Card: Not only did this card become much more useful for travelers when it began waiving foreign transaction fees, but you can also earn 10,000 bonus award miles each calendar year you spend at least $25,000 on the card, which is a worth about $150 in my estimation. Plus, if you’re a United MileagePlus elite, hitting that $25,000 threshold will waive the airline’s higher Premier-Qualifying Dollar requirements for elite status in 2015, which range from $3,000 for Silver to $6,000 for Gold and $9,000 for Platinum. Unfortunately, there is no waiver for 1K elites, who must spend at least $10,000 on United airfares each calendar year to requalify.
Starwood Preferred Guest Credit Card from American Express and Starwood Preferred Guest Business Card from American Express: Each of these cards offers automatic SPG Gold status when you spend $30,000 in a calendar year. Gold status earns perks like free internet, bonus points and upgrades, but just the 30,000 Starpoints alone are worth $720 at a rate of 2.4 cents apiece.
British Airways Visa Signature Card: While this card is losing its 1.25x base earning rate in May, one of the best features is that when you spend $30,000 in a calendar year, you get a “Travel Together” Companion Ticket good for two years. Though finding award seats to use with the companion pass can be difficult, and you still have to pay huge fuel surcharges and fees, you could still end up saving thousands of dollars if you max it out with a business or first class redemption.
The Cash-Back Option
Discover it Miles: I don’t talk about cash back cards as much as pure travel rewards credit cards, but this new option from Discover might be one of the best cards to use for paying taxes. While this card ordinarily earns 1.5 miles per $1 in spending (and each mile is good for 1% cash back or statement credits), Discover is currently offering a sign-up bonus that will double your points at the end of your first year as a cardholder, netting you a 3% return on spending. That’s not bad for a card with no annual fee!
For more ideas on paying your taxes with a credit card, check out these posts:
- Paying Taxes With A Credit Card To Earn Travel Rewards
- Paying Taxes With Credit Cards: 10 Scenarios That Might Make Sense
- What Credit Card Should I Use To Pay My Taxes Off With?
- Tax Time Pointers: Earning Points On Taxes
- Maximizing Your Taxes
- How Can I Earn Points or Miles for Tax and Mortgage Payments?
Thinking of using another credit card that I haven’t listed to pay your taxes? Feel free to ask questions about it in the comments and I’ll get back to you with my thoughts. The American Express Platinum card has some of the best perks out there: cardholders enjoy the best domestic lounge access (Delta SkyClubs, Centurion Lounges, and Priority Pass), a $200 annual airline fee credit as well as up to $200 in Uber credits, and mid-tier elite status at SPG, Marriott, and Hilton. Combined with the 60,000 point welcome offer -- worth $1,140 based on TPG's valuations -- this card is a no-brainer for frequent travelers. Here are 5 reasons you should consider this card, as well as how you can figure out if the $550 annual fee makes sense for you.
The American Express Platinum card has some of the best perks out there: cardholders enjoy the best domestic lounge access (Delta SkyClubs, Centurion Lounges, and Priority Pass), a $200 annual airline fee credit as well as up to $200 in Uber credits, and mid-tier elite status at SPG, Marriott, and Hilton. Combined with the 60,000 point welcome offer -- worth $1,140 based on TPG's valuations -- this card is a no-brainer for frequent travelers. Here are 5 reasons you should consider this card, as well as how you can figure out if the $550 annual fee makes sense for you.