The other week I told you about the possible ways to pay your taxes with a credit card, and when it was advantageous (and not) to do so.
When is it worth it?
- When the benefits outweigh the transaction fee. In other words, if you are accumulating points, miles or cash back that equate to more than the transaction fee, it’s worth it. In most cases, however, I find this not to be the case.
- You have minimum spending requirements to meet on new cards. Since taxes are usually a hefty amount, paying all or a portion of this bill with a credit card will most likely surpass your minimum spending requirements on those cards to earn any bonuses, albeit at a fee.
When is it not worth it?
- When your taxes are so high that you’d end up losing money on the transaction that isn’t worth it.
- When you aren’t receiving any benefits that are worth more than the processing fee.
- When you do not have any new credit cards with minimum spending thresholds to meet.
How I Paid My Taxes
A little back story here — In March, I had applied for a Chase Hyatt Visa, and recently realized I had not met the minimum spending requirement of $1,000 within the first three months of account opening. Not wanting the hassle of buying gift cards, and wanting to make sure I met the spend requirement quickly, I decided I would use this card to pay my federal taxes.
I had to pay a 1.87% fee on the payment, but because a similar percentage would have been the same for paying gift card fees, I decided it was worth it to save that hassle. I willingly paid the 1.87%. In exchange, I’ve now spent enough on the card to earn myself two free nights at any Hyatt worldwide.
There’s always an opportunity cost when spending on a credit card to earn points and in this case, I considered that cost worth it. Nights at the hotel of my choice will cost upwards of $1,000 a night for a standard room, so I would consider this an excellent trade-off.
Where will I use the two free nights?
Right now, I’ve got an award ticket booked in November to the the Maldives, so I’ll use my nights at the Park Hyatt Maldives Hadahaa. Since my two free nights are not long enough to complete a worthy stay there, I’ll add on additional nights using straight points, mostly likely at the 100% rate instead of points and cash, since I won’t be able to apply a Diamond suite upgrade on the two free nights anyways.
Did you pay your taxes with a credit card this year?
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