Thinking about paying your taxes online electronically with a credit card?

That might not be the best move.  The two major online payment processors, Official Payments (which is not official in anyway, it’s just their sneaky brand name), and 1040.com charge electronic filers 2.49% to make federal income tax payments via credit card.  That means a $500 payment could cost you an extra $12.45 just to use your credit card.  That’s worse than the highest ATM fees you’ll find in a bar.

That credit card fee also means that the value of any points or miles you might be getting are wiped out too, since most credit card reward programs earn points that are redeemed at about 1%.  Most cash back cards pay 1% as well, so paying a 2.49% fee to earn 1% doesn’t make much sense.

The exception to this rule is if you are in some sort of special intro period with your credit card rewards program or cash back program.

For example, if you have a new cash back credit card that pays 3% cash back on everything for the first 90 days, then you can actually come out ahead 0.51%.  Not big savings, but you do get the convenience of paying electronically for free.  However, if your cash back program has an annual limit and you expect to be hitting it, don’t waste your cash back eligibility on just getting a measly 1/2 percent.