If you paid your taxes with a credit card this year, you certainly won’t want to be charged credit card finance charges (interest) on top of whatever you were charged to use a credit card in the first place.
Yes, those services charge a fee, typically a percentage of the tax payment amount. So if you’re unable to pay off the balance in full (which is likely if you’re using a credit card to begin with), moving the debt to a lower interest rate is advisable.
One such method to avoid costly interest charges is by executing a credit card balance transfer.
Let’s look at an example:
Tax payment: $5,000
Credit card APR: 19.99%
Monthly finance charges: $83
Assuming you threw $5,000 worth of taxes on your credit card with an APR of 19.99% (pretty average), you’d be paying roughly $83 a month in finance charges if the debt remained steady (utilizing simple math).
Keep in mind that this is on top of whatever debt you had on the credit card before making the big tax payment.
If you get hit with hefty finance charges each month, you might get trapped in an ongoing debt cycle that will be difficult to escape.
Instead of paying interest each month and leaving little money for next year’s taxes and other bills, consider a 0% balance transfer credit card.
So instead of paying $80+ dollars each month in interest, you’ll pay nothing in interest and each payment will actually go towards your balance. In other words, you’ll actually pay off your taxes!
That could equate to some serious savings, which may also allow you to save up for your taxes next year. And ideally you won’t need to pay your taxes with a credit card ever again.