Millions of Americans will owe the IRS anywhere from a few dollars to many thousands of dollars when they file their income tax returns, and not all of them have funds available to pay what they owe. The simple answer might be to just put that bill on your credit card, but you could end up paying a lot more than you expect.

Whether it’s a good idea to pay with plastic depends a lot on how much you owe, your available cash, and what sort of credit card you have. So here are some things to keep in mind.

1. You Might Get A Better Deal With The IRS
If you’re going to need time to pay down your tax debt, you should consider setting up a payment plan directly with the IRS before turning to credit cards. Yes, interest will accrue on the unpaid balance as you make payments but the interest is often significantly less than the average credit card APR.

2. Don’t Forget The Fees
Uncle Sam doesn’t take credit card payments directly, so you’ll have to use one of a handful of authorized payment companies, each of which charges a fee, upwards of 2.35% of your tax bill. So if you owe $2,000, you’re going to pay $47 up front in addition to the interest payments if you don’t pay your credit card off in time.

3. What’s In Your Wallet?
Maybe you can pay off your tax bill in cash but you have a credit card with a really good rewards program where the benefit you’ll reap from charging several thousand dollars to the account outweighs the fee. Just make sure you don’t let that balance linger or you may end up paying more for those rewards than they’re worth.

Also, if you put that tax bill on a credit card with a 0% APR promotional period and you make sure to pay off the balance in full before that period ends, you could end up paying even less than if you’d made a payment plan through the IRS.

If you have available funds and your goal is just to pay quickly and get the IRS off your back, consider using your checking account’s debit card, as the fees for such payments are only a few dollars.

4. Know Your Credit Card’s Statement Period
Unless you’re making a last-minute payment near the deadline, you have some flexibility about when you choose to pay the IRS with your credit card. Credit.com’s Jason Steele advises that you can get a few extra weeks of interest-free financing by waiting until right after your current statement cycle closes.

[via Credit.com]

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