Owe on Your Taxes? Put the Credit Card Away

Even if we like the things that taxes give us (roads, schools, fire departments), nobody really likes paying them. It can seem like a prime opportunity to make the best of the situation if you're a credit card holder. After all, if you're going to spend big, you might as well get something back from it. But experts warn that it may not be that simple.

As MarketWatch's Jacob Passy points out, credit card companies have set up structures that may disincentivize paying for taxes with plastic. For one, the Internal Revenue Service employs card processors that add transaction fees to your payment. If you wind up owing several thousand dollars and up, a 1.99-percent addition could take a sizable bite from your savings.

There's another fundamental problem with using credit cards to pay taxes: Now you don't owe the IRS, you owe a creditor, presumably with a sky-high interest rate. If you're in it for the rewards and can quickly pay down your balance, more power to you. Just keep the function of credit cards in mind before you do so — they're there to make money, and not for you.

This isn't meant to scold, especially if you're considering using a credit card because you can't afford to pay your taxes all at once. If that's the case, the IRS actually has a system set up to help. Visit the website and read up about installment plans to see if that's the right option for you. There are small fees associated with those (about $31 for most), but at least you don't have to wing it on your own.