Credit Cards

Could a 0% APR card help if you can’t pay your tax bill?

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These are the pros and cons of using a 0% APR card to pay your taxes.

Key points

  • If you can’t pay your tax bill, you could receive penalties and interest.
  • A credit card with a 0% introductory APR could give you more time to pay your bill without interest.
  • However, you will have to pay a fee if you cover your tax bill with a credit card.

Tax day for the 2021 filing season is fast approaching. This means that if you owed money to the IRS last year, you should be ready to send your payment before the due date of April 18, 2022. This is true even if you have requested an extension to file your taxes, as the bill still needs to be paid by the April due date.

Unfortunately, some people just don’t have the money to send to the IRS on time. And if that’s the case, failure to pay taxes could lead to penalties and interest that add significant costs.

If you find yourself in this situation, you may want to discuss whether using a 0% APR credit card to pay your taxes might be a better approach than paying late or opting for an IRS payment plan. Here are the pros and cons to think about before you decide if charging your unpaid tax bill and paying it over time is a good move.

Benefits of using a 0% APR card to pay the taxes you owe

There are some definite arguments in favor of charging your taxes to a 0% APR credit card if you can’t pay them in full.

The biggest benefit is that you won’t have to pay interest or IRS late fees if you deposit your taxes on a card. A credit card that offers an introductory 0% interest rate on purchases will give you plenty of time, often 12 to 15 months, to pay off your balance without any of your money going to interest. This means your debt is likely to be easier and faster to pay off than if you had to cover the fees and finance charges.

Putting your tax bill on a 0% APR card may also allow you to earn credit card rewards if your card offers them. This could help offset some of the costs you face.

Disadvantages of using a 0% APR card to pay taxes

Now, there are also downsides to this approach, so you’ll want to think about these factors before you decide.

One big problem is that there is a fee to pay your taxes with a card. A third-party payment processor handles this transaction, and the fee is around 2% of the balance, depending on which processor you use. This fee may offset some or all of the interest saved by not leaving your bill unpaid.

You will also have little time to pay your tax debt. If you can’t pay it off before the 0% introductory rate expires, you’ll end up paying a very high rate, since expensive finance charges are common with credit cards. The standard rate could be well above what you’d pay under an IRS payment plan, so your debt could be more expensive in the long run if you don’t pay it off before your credit card introductory rate ends.

You’ll want to think about how quickly you’ll be able to pay off your tax debt once you’ve loaded it onto your card, and research the best 0% APR credit cards that offer generous rewards, to help you decide if this method of dealing with unpaid tax debt is right for you. is right for you.

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