Credit Card Issuers Ramping up Income Tax Payment Marketing Efforts

By Amy Arnold, CardRatings.com Reporter


Each year more and more Americans are choosing to pay income taxes with a credit card despite having to pay the normal 2.49% convenience fee. The IRS reported that in 2005 credit card payments increased by 53%. This tax season credit card issuers, along with MasterCard and Visa, are finding ways to help make paying taxes with credit cards even more attractive.

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“Cardholders enjoy the ease, security, and rewards opportunities that come with using payment cards to pay taxes, and are choosing to do so at an increasing rate,” commented Donna Johnson, vice president of New Markets at MasterCard International. “With this in mind, we set out to put together a program that gives taxpayers even more incentive to settle their taxes online with MasterCard.”

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Here are some of the promotions sponsored by various credit card companies that you can take advantage of during the 2005 income tax filing season.

Save on Convenience Fees When Filing Electronically

No Convenience Fees

• MasterCard, H&R Block, and Link2Gov (one of two official companies authorized to process income tax credit card payments) teamed together to refund the normal 2.49% convenience fee on the first $350 balance. To benefit from this option you must purchase an H&R Block® Online Tax Program through http://www.hrblock.com/goto/mcrebate/ and use it to prepare your return. Once the return is prepared click on the PAY1040 hyperlink to pay the balance due using your MasterCard credit card. This offer is good for online payments made on or before October 16, 2006.
• Visa is offering a similar promotion with online Visa check card payments made on or before April 19, 2006. As with MasterCard, you must use H&R Block’s TaxCut Online Product.

Reduced convenience fee

• MasterCard and Official Payments Corp. (the other official company authorized to process income tax credit card payments) teamed together to offer a reduced convenience fee when consumers use a MasterCard to make an online tax payment through www.officialpayments.com/mcfeeoffer.jsp. Instead of paying the normal 2.49%, consumers pay 1.99%. This offer is good for online payments made between January 1 and April 17, 2006.
• Visa is offering a similar promotion with online Visa credit card payments made on or before April 19, 2006. As with Visa’s check card promotion, you must use H&R Block’s TaxCut Online Product.

Earn Rewards by Paying Income Tax with a Reward Card

While you need to carefully weigh the balance between earning a reward and the convenience fee that is levied (the reward rarely outweighs the fee), credit card issuers are offering promotions to entice consumers into paying taxes with plastic.

• Earn double miles for taxes paid between January 4 and December 31, 2006 with United’s Mileage Plus® Visa. Payments must be made through Official Payments by calling 1-800-272-9829 or online at http://www.officialpayments.com/. There is no cap on the amount of miles earned, but your account must be open and not delinquent at the time points are awarded.
  
• American Express offers double points with their Starwood Preferred Guest Card, but with limitations. You can accrue a maximum of 5,000 points and it is only on federal tax payments between March 1 and April 17, 2006. Payments can be made either through Official Payments or Link2Gov.
  
• Earn double miles with American Express’ Delta Sky Miles with the payment of federal taxes between February 15 and April 17, 2006. Payments can be made either through Official Payments or Link2Gov.

One final note: consumers that can not pay off their tax bill in full when their statement arrives should definitely avoid these offers. There are better ways to finance your tax payment than paying interest (potentially up to 30%) on an unpaid credit card balance.

We welcome your comments about credit and money issues in our popular credit forum!

Amy L. Cooper-Arnold has been a reporter for CardRatings.com since 2004. Her articles have been republished by respected publications throughout the country, including Young Money Magazine, E/The Environmental Magazine and About.com. Amy recently graduated with honors from Austin Peay Univ. and is currently taking graduate-level classes.

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