It's always annoyed me that we can't pay our taxes with a credit card for free. I mean, come on—it's 2010, and I still have to cut a check or set up a direct debit to the IRS each year. It just seems so old fashioned. I would much rather use my credit card to pay online, rack up rewards points, and enjoy having an extra 30 days or so before coughing up the cash to pay my balance in full. Wouldn't you?
But alas, I'm too cheap to fork out the 2.35% convenience fee that sites like OfficialPayments.com or Pay1040.com charge for paying your taxes with plastic. And the government is clearly too cheap to absorb the merchant card expenses like most retailers do. The good news is 2010 will provide a new option for paying your taxes online. For the first time ever, American Express recently announced that cardholders will now be able to redeem membership rewards points when paying their taxes through the two sites mentioned above. When I heard this last week, I thought it sounded like a great move on the AmEx's part. It seemed logical that there may be a lot of cash-strapped Americans these days who could really benefit from this sort of tax option during rough economic times.
The bad news is it clearly won't make sense for the vast majority of cardholders. Here's why. For example, how many points do you think it would it take to pay a $2,000 tax bill? Are you ready for this? A mere 400,000 points! And since most AmEx credit cards reward cardholders with one point per dollar spent, you can easily do the math. I doubt there are many cardholders with a tax bill of $2,000 who have spent at least $400K on their American Express credit cards. While I think this is a great concept and could certainly be a last resort for some big-time spenders with beaucoup points who have no option but to pay their tax bill with credit cards, I can't imagine it becoming a popular use of points among the majority of American express cardholders.
There are certainly more efficient ways of redeeming membership rewards points. As for my AmEx points, I'll take cash please.
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