TPG reader credit card question: Are tax payments with my credit card considered a cash advance?
Editor’s note: This article is part of a weekly column to answer your credit card questions. If you would like to ask us a question, tweet us at @thepointsguy, message us on Facebook or email us at tips@thepointsguy.com.
While the 2021 tax season is officially behind us, there are important things to keep in mind for any tax season -- no matter what year it is.
First, did you know you have the ability to pay your taxes with a credit card? The Internal Revenue Services (IRS) works with three approved payment processors to allow credit card transactions. However, at a minimum, you’ll pay a convenience charge of 1.96%.
In some cases, this additional fee is worth it. Some cards offer more than 1.96% in cash back or rewards points, according to TPG valuations. TPG reader Mark Copella wants to know how tax payments are processed -- and whether they show as cash advances or a normal transaction.
[pullquote]In the future, I know I want to use my card to pay for taxes. It makes sense for me even with the fees. However, how can I confirm that my card counts tax payments as purchases that get cash back applied? In other words, will it count as a cash advance?[/pullquote]
First, a cash advance is a feature that allows you to withdraw some portion of your credit line as cash. However, they typically incur high transaction fees and high-interest rates. Plus, cash advances don’t count as qualifying purchases so you won’t earn rewards.
To mitigate the risk of accidentally triggering a cash advance, try reducing the cash advance limit allowed on your card. Many card issuers will allow you to set it all the way to zero, so any transaction that codes as a cash advance will simply be declined.
But for Mark, the good news is that paying taxes with your credit card is not considered a cash advance. That means you'll earn rewards on that payment.
Related: Chase has updated its definition of cash-like transactions: Here’s what you need to know
For instance, PayUSATax, the credit card payment processor that charges the smallest transaction fee (1.96%) to pay your taxes with a credit card, clearly states on their website that your tax payment is not considered a cash advance.
The convenience fee is charged by Value Payment Systems, LLC to cover the cost of processing the transaction. Fees are based on the amount of the payment or payment method and are shown after selecting your payment method. Your tax payment will be treated as a retail purchase and not a cash advance purchase.
If it makes sense for you, you can pay your taxes with a credit card -- and you'll earn rewards in the process. Remember just to do the math to determine if it's worth it, considering the minimum 1.96% transaction fee on the total amount owed.
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Annual Fee
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Build your loyalty to Delta by applying for the carrier's mid-tier card option, the Delta SkyMiles Platinum card. The annual fee is quickly recouped by the card's travel perks, such as an application credit to Global Entry or TSA Precheck, annual companion certificate and so much more. Plus you can fast-track to elite status simply through card spend.Pros
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- Doesn't make sense if you don't fly Delta
- SkyMiles aren't the most valuable airline currency
- Earn 90,000 bonus miles after you spend $4,000 in purchases on your new Card in your first 6 months.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. Payment of the government imposed taxes and fees of no more than $80 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights. Plus enjoy Main Cabin 1 Priority Boarding and settle into your seat sooner.
- New: Card Members get 15% off when using miles to book Award Travel on Delta flights through delta.com and the Fly Delta app. Discount not applicable to partner-operated flights or to taxes and fees.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets.
- Earn 1X Mile on all other eligible purchases.
- Enjoy a per-visit rate of $50 per person for Card Members and up to two guests to enter the Delta Sky Club when traveling on a Delta flight.
- Fee Credit for Global Entry or TSA PreCheck® after you apply through any Authorized Enrollment Provider. If approved for Global Entry, at no additional charge, you will receive access to TSA PreCheck.
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- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees
Rewards Rate
| 3X | Earn 3X Miles on Delta purchases and purchases made directly with hotels. |
| 2X | Earn 2X Miles at restaurants worldwide, including takeout and delivery in the U.S. and at U.S. supermarkets. |
| 1X | Earn 1X Miles on all other eligible purchases. |
Intro Offer
Earn 90,000 bonus miles after you spend $4,000 in purchases on your new Card in your first 6 months.Earn 90,000 Bonus Miles50,000 Bonus MilesAnnual Fee
$250Recommended Credit
Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.670-850Excellent/Good
Why We Chose It
Build your loyalty to Delta by applying for the carrier's mid-tier card option, the Delta SkyMiles Platinum card. The annual fee is quickly recouped by the card's travel perks, such as an application credit to Global Entry or TSA Precheck, annual companion certificate and so much more. Plus you can fast-track to elite status simply through card spend.Pros
- Earn bonus Medallion® Qualification Miles (MQMs) and an Medallion Qualifying Dollar (MQD) waiver when you hit specific spending thresholds with your card within a calendar year
- Receive a Domestic Main Cabin round-trip companion certificate each year
- Statement credit for TSA PreCheck/Global Entry fee (up to $100)
- First checked bag free
Cons
- Doesn't make sense if you don't fly Delta
- SkyMiles aren't the most valuable airline currency
- Earn 90,000 bonus miles after you spend $4,000 in purchases on your new Card in your first 6 months.
- Receive a Domestic Main Cabin round-trip companion certificate each year upon renewal of your Card. Payment of the government imposed taxes and fees of no more than $80 for roundtrip domestic flights (for itineraries with up to four flight segments) is required. Baggage charges and other restrictions apply. See terms and conditions for details.
- Enjoy your first checked bag free on Delta flights. Plus enjoy Main Cabin 1 Priority Boarding and settle into your seat sooner.
- New: Card Members get 15% off when using miles to book Award Travel on Delta flights through delta.com and the Fly Delta app. Discount not applicable to partner-operated flights or to taxes and fees.
- Earn 3X Miles on Delta purchases and purchases made directly with hotels.
- Earn 2X Miles at restaurants worldwide including takeout and delivery in the U.S., and at U.S. supermarkets.
- Earn 1X Mile on all other eligible purchases.
- Enjoy a per-visit rate of $50 per person for Card Members and up to two guests to enter the Delta Sky Club when traveling on a Delta flight.
- Fee Credit for Global Entry or TSA PreCheck® after you apply through any Authorized Enrollment Provider. If approved for Global Entry, at no additional charge, you will receive access to TSA PreCheck.
- Earn up to 20,000 Medallion® Qualification Miles (MQMs) with Status Boost® per year. After you spend $25,000 in purchases on your Card in a calendar year, you can earn 10,000 MQMs up to two times per year, getting you closer to Medallion® Status. MQMs are used to determine Medallion® Status and are different than miles you earn toward flights.
- No Foreign Transaction Fees.
- $250 Annual Fee.
- Terms Apply.
- See Rates & Fees