Saving Money as You Pay Large, Unexpected Tax Bills
What do taxes and money remittance have in common? Nothing exactly, but if you receive a hefty tax return, you’ll likely be able to help your family and friends overseas. As noble as that may seem, unfortunately, taxes are unavoidable and have a way of snagging more money than bargained for, and often without notice. Those of us who have had the wind knocked out of our sails after an appointment with the accountant, know how menacing a huge debt to the government can be.
When taxes seem insurmountable, the first natural reaction may be to charge the payments—that’ll lighten the burden right? Wrong. If you decide to pay taxes with a credit card, you’ll likely end up paying more than you owe and be subject to hidden fees.
Here are 3 reasons you want to avoid paying taxes with a credit card:
When you swipe your credit card, a transaction fee occurs, but you are unaware of it. Most merchants pay for the transaction fee. However, the U.S. tax code prohibits the government from covering credit card fees from card processors. This means if you pay taxes with your credit card, you’ll probably be assessed with service charges. Fees range from 1.87% to 2.35% of the total. Don’t let generous cash back rewards fool you either. You probably won’t end up saving money if you pay taxes with a credit card.
If you owe more taxes than the limit of your credit card, or pretty close to it, you may max out your credit card. This will simply add another layer of complication. The percentage of credit used, also known as the credit utilization ratio, is important to take notice of. If the ratio is too high or abused, you may ding your credit.
High Interest Rates
Most credit cards carry a high interest rates usually in the double digits. The longer it takes you to pay off your bill, the more you are going to end up paying. You could end up paying significantly more just because you decided to put it on a credit card. Imagine what you could do with a few extra hundred dollars you save by avoiding credit card interest and fees? You might consider sending money online to family or friends abroad.
So what’s the solution to paying for large tax bills? Qualified participants can consider paying in installments. You will end up paying a little more with the payment program than if you paid the taxes in full upfront. However, you’ll likely spend around 10% less with a payment deferment program from the IRS verses paying with a credit card.
Sending Money Online is Easy and Affordable with Lucky Money
To learn more about money management and remittance, browse our other blogs on the Lucky Money website today at https://www.luckymoney.com/. If you are interested in sending money online we offer low rates for money remittance to many countries. If you have questions feel free to contact us online or call (888) 826-4427.