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More Americans paying taxes with credit and debit cards
By EILEEN ALT POWELL AP Business Writer NEW YORK -- As more Americans file their taxes electronically, they're also more likely to use credit and debit cards to pay the taxes due.
Many consumers find that using plastic is convenient and also boosts their rewards points. On the other hand, credit experts worry that the trend suggests more people are digging themselves deeper into debt.
The Internal Revenue Service said it received 950,715 credit and debit card payments in 2004, triple the volume of 2002. An additional 834,000 payments last year were automatically transferred from checking or savings accounts, the IRS said.
"The country is moving toward becoming a cashless society," said James R. Weaver, chairman and chief executive of Tier Technologies of Reston, Va., which does card processing of IRS payments. "We're seeing more than 20 percent growth a year, and we would expect that type of growth to continue for the foreseeable future."
Tier Technologies owns the Official Payments Corp., one of two companies that manage call centers and Web sites to handle card payments for federal, state and local tax payments. Tier Technologies' site, www.officialpayments.com, along with www.pay1040.com, which is operated by Link2Gov Corp. of Nashville, Tenn., both assess fees of 2.49 percent of the tax payment to cover processing costs.
That means a consumer who uses a credit card to pay a $1,000 tax bill would have to add an additional $24.90 in processing fees.
Credit experts are concerned that for some consumers, the use of credit cards to pay taxes is a sign they're mismanaging their money.
David C. Jones, president of the Association of Independent Consumer Credit Counseling Agencies, said people who find they're short of money to cover taxes as the April 15 filing deadline approaches probably haven't had enough withheld by their employers. Or they haven't set money aside in anticipation of their annual tax bill.
"That's just bad financial planning," he said.
Jones sees no problem charging taxes if the consumer can pay the bill in full at the end of the month.
Otherwise, he said, those consumers should immediately go to their employers and increase their tax withholding so future tax bills are covered.
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