Low Interest Credit Cards and Uncle Sam
Should You Use Low Interest Credit Cards to Pay Your Tax Bill?
Tax season is upon us and for some individuals tax season might present an opportunity to use their low interest credit cards. It’s certainly great to get a tax refund, but some Americans will not and end up owing the IRS when they file their yearly taxes. If you are one of those individuals who are expecting a tax bill this year, you might be wondering whether you should use your low interest credit cards to pay for it.
Sometimes It Pays
Certainly you can use any credit card to pay for your tax bill, but low interest credit cards would be more beneficial to use to cover your tax bill especially if you owe a large amount. When filing online, you could schedule your payment to occur on April 15th. If you have the ability to pay your taxes in full without relying on a credit card, then opt for that route. However, you could use your low interest credit card to pay your tax bill and then make one large cash payment equal to that amount. This will allow you to take advantage of any cash-back rewards programs your credit card offers.
It's Better Than Home Equity
If you don’t have any available cash on hand and you're thinking a home equity loan would be better than your credit cards, you might want to rethink that. It is better to use a low interest credit card to cover your tax bill then to take a home equity line of credit to foot the bill. If you have problems meeting your credit card bills, you might ruin your credit rating but at least you won’t lose your house.
What happens if don’t have available space on credit cards and you owe money into the IRS? Well, unfortunately, if cannot pay your full balance by April 15th, then you subject to interest or penalties from the IRS. In this situation when you don’t have any low interest credit cards available, it would be best to consult a tax professional to learn about your options.