Everything About Credit Cards

So you wish to fulfill your obligation of being a good American citizen and are thereby planning to pay your taxes on time. Great! But if the thought of paying taxes through your plastic money has crossed your mind, beware!

Although IRS suggests that paying taxes through your credit cards is a safe and convenient option, you must be smart enough to track that it isn’t really a cheap option. Listed below are the three primary reasons why you should avoid paying taxes through credit cards:

1. Additional Convenience Fee – IRS contracts few companies to deal with the payments they receive through credit cards, however these companies are not paid by the government for their services. Consequently, it’s you, the tax payer, who has to pay for their services. The convenience charge usually varies between 1.9% and 2.35% and depends on the credit card you are using, as well as the company you approach to make the payment. The company names along with the rates charged by them are given on the IRS website, here. For instance, a tax bill of $1000 can cost you a convenience fee of around $23.50, and this is excluding the interest rate that will be charged by your credit card company.

So, unless there really is no alternative and you are stuck in a financial emergency, credit card payment to pay taxes doesn’t make much sense. In a dire financial need, however you will be happy to know that your convenience fee is exempted from tax. This tax deduction is allowed only until a limit of two percent, so make sure you discuss this with your tax preparer before you proceed.

1. Interest May Accrue on Your Tax Payment – It’s common knowledge that if you do not pay your credit card bill due to any reason or simply forgets to pay it, within the grace period, interest on your tax would accrue over time, adding onto your misery. So, you will pay for your convenience fee, enormous interest rate of the credit card company, plus your tax amount. You will not even know when the next year arrives, and it will be time to make the tax payments again! Agree, some credit cards do provide you introductory offer like zero percent APR for the initial one year but still you will be paying the convenience fee extra. Aren’t the taxes that we already pay enough?

1. It May Signify a Warning to Your Credit Card Issuer – This may or may not be true for you but paying taxes through credit cards often leave an impression that you are undergoing a financial crisis. As a result, you are suddenly viewed as a credit risk. It reduces the amount available in your credit limit. The revolving utilization ratio on your card also decreases that impacts your credit score.

Due to this, your card issuer becomes finicky about your credibility of paying their bills on time. Consequently, you may have to bear their unjustified actions, like decrease in your credit limit, increased APR, et al. Hence, if by any chance you may have to make a credit card payment for your taxes, make sure that you pay them off without any delay to dispel the apprehension of your issuer.

In a nutshell, the cons of paying taxes with credit cards far outweigh the benefits they offer. It is thereby advisable to prefer the usage of other modes of payment to pay off your taxes and discard plastic money unless you have no other option left with you.

According to recent debt statistics, it has been seen that there is too much credit card debt that is bothering the debtors in the US. If you too are someone who has been spending sleepless nights due to the rising level of personal credit card debt level, you must be looking for some solid steps to get rid of the high interest debt burden. If you want to lead a peaceful life without the harassing calls from the collection agencies, you must take some vital steps on your own. Though credit card debt consolidation companies are there to help you with your unsecured debt burden, yet it is always better to take some do-it-yourself steps on your own so that you can save your dollars and value them. Have a look at the steps that you can take on your own in order to get out of debt.
 
1.    Resolve to spend less than what you make: Make it a fundamental habit to save money and spend less than what you make in a particular month. You must realize once and for all that you cannot get things that you can’t afford to pay now. Though you may be using more than 2 credit cards, yet whipping the plastics for every little purchase is not the way to go. Pay only for the things that you can do with cash and not with credit.
 
2.    Gather all the latest bills of all the accounts: You must gather the latest bills of your credit card debt accounts so that you get to know the exact amount that you have to repay your multiple creditors. Unless you know the amount, you can never devise a solid saving and spending plan in order to pay off your rising debt burden.
 
3.    Pledge to make more than the minimum monthly payment: Though the creditors may ask you to make just the minimum monthly payment on all your credit cards, you must make sure that you do not follow their words. These are just advices that can drown you into high interest debt as you may take a longer time to repay your debt burden. Try to make something more than the minimum monthly payment so that you may out of debt sooner, not have to pay too much as interest rates.
 
4.    Follow a frugal budget: The frugal budget is the best way to control your personal finances and without this you can neither plan your future financial goals nor pay down your credit card debt. Eliminate all unnecessary spending and spend your valuable dollars only on the things that you can’t do without.
 
5.    Negotiate with your creditors: You can also arbitrate with your creditors and tell them about your financial hardship. It often happens that if you tell them about your financial hardship, they can relax the terms and conditions on your credit cards, thereby expediting the repayment procedure.
 
Showing your creditors a well-planned budget may act as a catalyst in making them agree to a relaxed term on your credit cards. Instead of paying the professional credit card debt consolidation companies, you can certainly try do-it-yourself debt consolidation.