Home > Travel > Paying Taxes With a Credit Card for Travel Rewards and a Giveaway!

Paying Taxes With a Credit Card for Travel Rewards and a Giveaway!

Paying tax with credit cards

These don’t work with Bluebird!

Welcome Million Mile Secrets readers and thanks so much to Daraius for asking me to participate in his Friday travel series today. Head over and check out the interview.

For the past couple of years, taxes have been our biggest annual expense, more than what we pay for our mortgage, utilities, and groceries combined. We have our own personal income tax, which includes self employment income, plus three separate property tax bills.

Since paying off all  consumer debt in 2012, we try to use our reward credit cards for every expense to earn points and miles. Since we pay off the balances each month, it’s an amazing way to travel for free or almost free. We have a big trip in the works for next year. It will be our first family trip to Europe, and I decided there must be a way to take advantage of these awful taxes to earn some major rewards. This is my experience, good and bad, of paying high taxes with a credit card.

Are Fees Worth the Cost of Paying Taxes With Credit Cards?

I have know for years that you could pay taxes with a credit card. When we were drowning in debt, that would have been an awful idea, but now, maybe it’s not such a bad plan. The government does not accept plastic, but they use companies that will process your tax payment for a fee, the cheapest being 1.87% of the amount.

Last year, we received a targeted offer of 100,000 Membership Rewards points with a new American Express card if we spent $10,000 in 3 months. At first, I disregarded it, as I knew that was more than our monthly spending. Then I remembered that we had a $10,000 tax payment coming up and decided that maybe $187 in fees was a fantastic deal for 100,000 points that can transfer to several airlines or hotels. That many points get us pretty far toward our travel goals next year.

Moving Up to Bluebird

This year we have moved up the food chain in travel hacking so to speak. When I first heard of American Express Bluebird, I thought it was insane. It seemed like so much work, especially since we didn’t have any stores that sold Vanilla Reloads in our area. Now that those don’t work, everyone is in my same boat.

If you aren’t in the know, you can open a Bluebird account, which is a free checking/debit alternative, then use pre-paid debit cards with a PIN number to load the account. You buy the debit cards at drug stors or grocery stores with a credit card to get points. You can use Bluebird’s bill pay or checks to pay bills that don’t take credit cards. Seems like something someone with a job and/ or family responsibilities or just plain common sense would avoid, right?

Well, not so fast. Even though it is lots of work, I decided to try it out. We had a $2500 property tax payment in February and our county does not take credit cards. I decided to give Bluebird a try, so I signed up and started looking for the correct pre-paid debits that would work to fund the account. After some trial and error, the Vanilla Visa Debit cards at Walgreen’s were the easiest to use. They have a $4.95 fee for each card, regardless of whether you put $25 or $500 on the card. I would recommend using the full $500 per card to minimize fees. When you use the Vanilla debit card, the PIN number is whatever numbers you choose, so you can punch in any 4 digits when the card is swiped.  I can buy $1000 worth of debit cards at a time, then go right to Wal Mart and load them. Bluebird only lets you load $1000 per day up to a max of $5000 per month.

The Visa debit cards I’ve tried from Kroger work fine too, but their fee is $1 more per card. They also come with a little paper inside the gift card pack with a printed PIN number. The Mastercards DO NOT WORK AT All, even though you can call and set up a PIN number over the phone. While the fee per card seems higher at grocery stores, if you have a card that gives double or triple points for grocery purchases, it might make more sense to use these.

Paying Property Tax With Bluebird

It took a few trips to Walgreen’s/Wal Mart, but it was no problem paying our property tax bill with Bluebird bill pay. You can also order checks from Bluebird  to pay the IRS or state taxes. Bluebird can save money on fees for sure. For example, my $10,000 tax payment would have only cost $99 using Bluebird and pre-paid debits, but it would have taken ten trips to get the account loaded. If you have the time, it’s worth it, but it does get tedious.

Will I Always Pay Taxes With Bluebird or a Credit Card?

Not necessarily. With two days left to go until April 15th, I still needed to get $3000 into Bluebird to be able to pay our 2014 estimates for this quarter. I’d run out of time. I considered just using a credit card to pay the taxes online. I could have used the Barclay Arrival card that gives double points on every purchase, which would have been more than the 1.87 percent fee. When I did the math, it only saved a few dollars, so I had suck it up and write a normal check. I don’t have a card right now that requires a big spend to hit a bonus, so it’s not worthwhile to incur the fees by paying online. However, if there is am amazing offer we need to take advantage of down the road, you can bet I’ll be hitting the Walgreen’s/Wal Mart circuit or just paying taxes with a credit card if if saves hundreds or thousands of dollars on travel.

As a disclaimer, please, please, please do not use a credit card to pay for anything if you carry balances. Use the promise of future travel rewards to motivate you to pay off debts and become financially responsible!

Giveaway!

gift card giveaway

To celebrate taxes being over for 2013 and to reward you for reading that long post, we are giving away two prizes. First prize is a $25 Southwest Airlines gift card and second prize is 4 free drink coupons good for any beverage on your next Southwest flight.

I will email  the gift card number and pin to the winner and will send drink coupons by USPS. Drink coupons expire on December 31, 2014. Giveaway ends on 4/26/14 at midnight.

 

a Rafflecopter giveaway

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

43 comments

  1. No, I’ve never paid taxes with a credit card.

  2. So excited to find your blog. Will send it to my adult children as well. They NEED. To hear what you are teaching.
    Thanks

    • Thanks Carol. Life is so much better without debt and when your money has a purpose. I only took me almost 40 years to figure that out, but at least I did!

  3. I haven’t ever thought to pay taxes with a credit card, but I’m fairly new to this whole credit card rewards game. Next year!

  4. Yes

  5. I’ve paid with a credit card indirectly through my Bluebird account. Your website has such good info. Thanks for the giveaway!

  6. Nice interview Kim! We’ve not paid taxes with credit cards yet. I strongly considered it this year, but we already have some major spending planned this month and next and beyond that didn’t have a card we were working on. I’m definitely considering it for our next quarterly taxes, assuming we have a card where paying the fee would be worth it.

    • It does seem odd for a financial blogger to be paying fees, but I think it’s all about the big picture and there are really no financial rules that are always black and white.

  7. I followed you from MMS link this morning. I got out of tens of thousands of debt myself.
    Question for you is that I have BlueBird account that I’m not having any luck loading and spending on. I tried to load few VISA GC onilne and now the account is locked until I call their security division. ugh! How did you load your BB for thousands of $$ did you have to do it at WalMart store directly?

    • Yes, unfortunately, you have to go to a physical WalMart store. I tried to load a debit card online and got my account locked up too. We live in a very rural area and Walgreen’s is right beside Walmart and we basically have no traffic, so it’s not that hard for me if I go when both stores are not busy. If I had to drive 30 minutes to do it, no way.

  8. Great post, Kim! I’ve never paid taxes with a credit card, but I probably would if it made sense at that moment. I pay quarterly, afterall. I could be earning some serious points!

  9. No, I have never tried to pay taxes with a credit card. Love your blog!

  10. we have used UFB Direct debit card to pay taxes which has a flat fee of $2.79. You get 1 American airlines mile for each $2 spent and there are limits, but it is easy and a nice bonus.

    • American is one of the few airlines that fly out of our regional airport. I have not looked into debit options, but that is certainly something I should consider. Thanks for the tip.

  11. I saw that you could pay taxes with a credit card, but we didn’t because of the fee. The car dealership did let us put the first $4,000 of our car purchase on a credit card, though, so that was my latest big credit card hack.

  12. I actually paid my estimated taxes with a credit card this year. I only did it because I wasn’t setup to do the electronic draft and they wouldn’t send me a pin until after the due date. Yes, I paid a fee, but I did earn some miles for it!

  13. Interesting read. I’m addicted to credit card points and have always wondered if trying to pay the taxes with a points-card was worth it. I’ve personally never tried it!

  14. i haven’t paid my taxes with credit cards before…that is interesting and i love earning points! i will have to think about that next year!

  15. I have not paid tax with a credit card since I just write a check. Thanks.

  16. I paid my taxes with checks from bluebird.

  17. I have not paid with my credit card, only check/cash.

  18. I realized after I sent the checks for our property taxes last fall that it might have been worth it to charge them to get a quick turnaround on a sign up bonus. And this year we have the unfortunate “problem” of getting a refund from the IRS. Such a shame, right? =)

    • I guess technically you should never get a refund if you do the correct math, but I’d have been happy to see one:)

  19. Great post, Kim. We never have to pay in very much in taxes, so it’s a non-issue for us. I would strongly consider it for the future, though. Have a great weekend!

  20. I haven’t paid taxes with a credit card.

  21. Yes, I did it 2 years ago.

  22. The bluebird account is an interesting way to meet the spending requirements. I wanted to mention that I recently got the Amex Starwood Preferred Guest card and with that card when you buy reload prepaid cards they DO NOT count as part of meeting your spending requirement. I thought that was interesting when I read the fine print. I wasn’t planning on buying prepaid cards but it’s something to check before you use a particular card and you’re trying to meet a spending requirement.

    • I think anything that is coded as a reload or from a bank will not count and it may count as a cash advance, which is terrible. If you buy cards at a grocery or drugstore, it gets coded as grocery or pharmacy and you do generally get points for that. Thanks for pointing that out.

  23. I have thought about using CC to pay taxes but didn’t because of the fee. But now I have read your analysis, i may think of doing that in the future!

  24. No, I haven’t!

  25. I have not pay taxes with a credit card before but thanks for the suggestion

  26. Nope, I haven’t

  27. No I haven’t.

  28. I have never paid taxes with a credit card but have been exploring the option.

  29. I paid part of my taxes this year with gift cards I bought with a rewards card. I’d have paid more if they’d have let me, but there was a transaction limit per SSN.

  30. No I’ve never paid my taxes with a credit card.

  31. No I have never paid taxes with a credit card.

Leave a Reply

Your email address will not be published. Required fields are marked *

*