Credit Cards: When the Fees are Worth It

 With the Super Bowl two weeks away, it's time to turn to that next American tradition:  Tax Season!

Kidding.

If, like me Tax Season is not your favorite American tradition-especially if you end up owing taxes, I feel your pain. ...and I have a suggestion you may want to consider if that is where you find yourself in the run-up to April 15:  Pay the taxes you owe with your Credit Card. 

Not Kidding.

It's crazy, I know.  But, bear with me.  As 70%+ of Americans have a credit card that pays some time of reward (cash back, points, etc...), this knowledge drop is for most anyone reading this post. If you're going to keep reading, there are two things you MUST do to make this play pay-off:  1.  You have to read the fine print on the IRS website to understand what the fee will be for your taxes owed to be paid by credit card and 2.  You have to read the fine print of your Credit Card to *accurately* calculate what the rewards/cash back will be on the charge.  ..and note that if the cash back is points, you then need to do some research to attach a cash value to those points. 

Why am I even suggesting this crazy idea?  Simple:  For *some* people, there is an opportunity to 'make money' on the charge-as in...the cash back/points earned have a higher value than the cost of the fee.  All you have to do is figure out the math in the must-dos.  

I know it might seem like the 'must-dos math' is a lot of work, it's not.  Let me demonstrate...

According to the IRS website, as of Jan 23, 2026 (the date of this post), here are the fees for the two payment processers if you use Credit Card to pay:

Source: https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

Not gonna lie...I don't know why anyone would choose the higher-fee, ACI to pay thru, but it's an option nonetheless.  ...and you can read more about this here:  https://www.irs.gov/payments/pay-your-taxes-by-debit-or-credit-card

..but, let's then assume you decide to pay your tax bill with Pay1040.  The credit card fee 1.75%.  All you have to do to 'make money' is have a cash back card that pays more than 1.75% or earn points that are worth more than 1.75 *cents*.  How can you figure this out?  There's usually a ton of fine print on your credit card website to help you figure this out.  And yes, sometime, the fine print is 'extra fine' when considering the additional details like 'cash back boosters' and things like that, so you might have to calculate a bonus cash back on top of your base earnings, but the math is usually there to find.  Certainly, the last several years that I've owed on my tax, by the time the dust settles on my cash back booster (when I've used my Bank of America Travel Rewards card...), I'm 'earning' 2.25% on the charge but only paying 1.75%.  That .5% difference is the incremental gain-the money you make!

Points can be a little trickier to figure out if that's the type of card you have.  Sometimes you can Google what your credit card points are worth, and they'll give you a range.  Sometimes, you can look at what your points would buy and figure it out (ie if you cash in 10,000 points for a $200 Gift Certificate, the points are worth $.20 each ($200 divided by 10,000).  $.20 is equal to 2%...which is greater than 1.75%.  If you don't have any Gift Certificates that can help you figure out the easy math, you can also look at buying points to see what the cost of a point is-and if the cost of buying points is higher than the cost of 'earning' points thru the charge fee...again, the charge fee is the cheaper way of earning points!  

AN ADDED BONUS

In addition to the points or cash back you may earn for the charge, there is an added bonus to using the credit card; in fairness, some people may consider this the more important feature:  You get to keep your $$ in the bank for longer (and hopefully earn a few $$ of interest).  If you pay your IRS bill online via direct debit (or write a check), it's highly likely the funds will be gone from your account in a day-or a week if you're lucky.  By using the credit card, while the bill is 'paid'...the funds don't leave your account until you pay your credit card bill-hopefully two, three, if not a full four weeks after the charge!

Now, the biggest *gotcha* with this entire play is that you HAVE to pay your credit card balance in full each month.  Otherwise, the XX% interest rate is going to blow up any positive math I've just showed.   SO, if you are carrying a balance on your credit card from month to month...unless you have a special 0% rate (and are paying the balance off before interest really comes due), I don't advise to use this strategy.  

Happy Tax Season!