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The pros and cons of paying your taxes with a credit card
Taxes and Accounting

The pros and cons of paying your taxes with a credit card

11 min read

If you love rewards, you’re probably used to putting everything on a credit card. But did you know you can pay your taxes with a credit card too? If you have a large tax bill, that means you’ll get even more benefits—but there are definitely costs associated with this decision. 

Read on to learn how to earn points from your tax bill and decide if it’s worth the price.

Highlights

  • You can choose to pay your federal taxes with your credit card to earn points, miles, cash back, or whatever your credit card company offers in rewards. 
  • If you use a credit card, the IRS tax payment will have an additional processing fee.
  • This fee could be worth it depending on the terms of your credit card.

Different ways to pay your taxes

There are many different ways you can pay your tax bill, including: 

  • Directly from your bank account.
  • A debit card, credit card, or digital wallet (not applicable for payroll tax deposits).
  • The Electronic Federal Tax Payment System (EFTPS), which makes payments from a bank account.
  • Same-day wire transfer.
  • Check or money order.
  • Cash.
  • Electronic funds withdrawal. 

The pros of paying taxes with a credit card

If you want to earn points from your tax bill, a rewards credit card is the way to go. Just like other credit card purchases, you could earn miles, points, cash back, or other rewards depending on what your card has to offer. 

In addition, some credit cards offer a big sign-up bonus if you purchase a certain amount within a set time limit, and paying your taxes with the card could help you reach this amount.

You might also need to reach a certain minimum spending requirement in order to qualify for certain credit card benefits, such as bonus SkyMiles on the Delta American Express Card. 

There are other potential benefits as well. Paying with a credit card gives you more time to pay off your tax bill—though if you don’t pay off the credit card bill right away, you’ll have to pay interest like any credit card purchase.

The interest could cancel out your rewards pretty quickly, so this is important to consider.

The cons of paying taxes with a credit card

These benefits come with a cost. If you want to pay your federal taxes with a credit card, you’ll have to pay a processing fee. The fee amount depends on which of the three IRS independent payment processors you choose. Think of it as a convenience fee.

screenshot-prices-to-pay-taxes-with-credit-card

Image source—IRS: Pay Your Taxes by Debit or Credit Card or Digital Wallet

On the other hand, if you want to make a payment to the IRS directly from your bank account, you wouldn’t have to pay any fees. 

Is paying business taxes with your credit card worth the fees?

Check with your bank or credit card company to see if they will cover the cost of the credit card processing fees you’ll have to pay with your federal taxes.

Some charge cards, such as those offered through Divvy, offer this as a courtesy so you can receive your rewards without incurring fees. If this is true in your situation, the credit card or charge card payment is a no brainer. 

But if you have to pay those processing fees out of pocket, then you’ll have to weigh the benefits with the cost and decide what makes the most sense for you. 

Paying taxes with Divvy

Divvy is currently working with clients to pay their federal taxes with Divvy for cash back.

 Here’s how it works:

  • You pay your federal taxes on a Divvy virtual card.
  • You are charged a processing fee to pay by credit card.
  • Divvy covers the processing fee and gives you additional cash back so you come out on top.*

This way you get all of the pros and none of the cons—because Divvy covers the processing fee for you. As always, Divvy has your back. 

*Terms and conditions apply. Before making a federal tax payment, reach out to the Divvy customer success team at (855) 229-3111 to maximize your benefits. Please be advised that this is not tax advice. Federal tax payments must be made through Pay1040.com.

Want to learn more about Divvy Rewards and how they can benefit your business—or just want to get cash back when you pay off your taxes? Get started today. 

The information provided on this page does not, and is not intended to constitute legal or financial advice and is for general informational purposes only. The content is provided “as-is”; no representations are made that the content is error free.

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