THE BLOG
02/27/2014 12:30 pm ET Updated Apr 29, 2014

Is Paying Your Taxes with a Credit Card the Worst Idea Ever?

With the most recent recession and America still trying to dig its way out of debt, many are balking at credit cards in a way that we never have before. With high interest rates and countless fees being tacked on to our debt, it seems like credit cards are used more as a torture device than a helpful crutch through difficult financial situations.

Even so, if used properly, credit cards can actually be useful. You just need to know how to play the game. Use the perks and rewards of a credit card for your own financial advantage.

If you are thinking of using a credit card to pay for your taxes, here are a few instances where it can actually be beneficial:

If You Are Going to Be Late Paying Your Taxes

This may seem counter-intuitive since the IRS is willing to give you a 6-month extension on your taxes, however, what many people don't know is that the IRS charges you interest on your taxes during that 6-month extension. If you owe a large amount of taxes, you could end up paying a lot more once all the interest is added on.

So what's the solution? Look for a credit card that offers a 0 percent intro APR for at least a year. This will give you a full year extension to pay off your taxes without being charged the extra interest. Even better, many cards with a 0 percent intro APR also offer cash back and travel rewards, so you will be earning extra points while you are saving yourself from extra interest.

If you don't think you'll be able to pay off your balance within a year or so, you can also look for a credit card that offers an ongoing low APR to save at least a little on the interest. Remember, the IRS can help you set up a payment plan, but they will continue to charge you interest for as long as it takes to pay off the balance -- so if you can get a lower APR with a credit card, it makes more sense to use the card to pay your taxes. Here is a good list of credit cards with either a 0 percent intro APR or a very low ongoing APR.

If You Want to Earn Extra Rewards Points

Taxes can be an excellent way to earn a bunch of extra rewards points from your credit card, especially if you owe a large amount in taxes. The more money you put on the card, the more points you will get. Just remember to make sure that you can pay the full balance by the end of the month, otherwise you are going to be charged interest that you wouldn't have paid if you went through the IRS.

If you want the maximum amount of points from your credit card, look for a card that offers the most cash back or travel rewards for everyday purchases. Many cards will give you 5 percent cash back if you use the card at gas stations or grocery stores, but those perks won't help since taxes don't fall into either of those categories.

Look for a card that gives you two times the points back on everyday purchases (like the Venture card or the Barclay Arrival World MasterCard), since that seems to be the best return on everyday purchases. Some of these cards will even give you an intro bonus of cash back or travel rewards, some worth up to $400. Check out this list of the credit cards with the best rewards to find one that will work for your tax situation.

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