Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

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Derivative
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Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Derivative »

Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

I am looking to open some new credit cards for their rewards and need to spend at least $3k in 3 months for some of them. I am wondering if it is stupid or smart to pay estimated business taxes with credit cards. The transaction fee is 1.87% and usually only takes a little off the reward that I get. Are there any other ways that are smarter to meet these minimum spending requirements?
BogleMelon
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by BogleMelon »

Derivative wrote: Mon Apr 23, 2018 2:14 pm Are there any other ways that are smarter to meet these minimum spending requirements?
Some banks can be funded by CC! Check this: https://www.doctorofcredit.com/does-fun ... h-advance/
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soccerrules
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by soccerrules »

I would not do it. It's cost you money to pay your taxes. I would find other spending options that don't cost you to charge.

I would buy everything else on CC (Food/dining, gas, utilities,charitable giving). I would think you could spend $1000/mo without much effort.

You may need to move some charges from another cash back card to meet this 3 month bonus- and then move them back - i don't know.

I am by no means an expert at the sign-on /switch cash back bonus card game.
Don't let your outflow exceed your income or your upkeep will be your downfall.
an_asker
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by an_asker »

Derivative wrote: Mon Apr 23, 2018 2:14 pm Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

I am looking to open some new credit cards for their rewards and need to spend at least $3k in 3 months for some of them. I am wondering if it is stupid or smart to pay estimated business taxes with credit cards. The transaction fee is 1.87% and usually only takes a little off the reward that I get. Are there any other ways that are smarter to meet these minimum spending requirements?
I've done this.
madbrain
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by madbrain »

As long as the bonus has a much higher value than the amount you are spending in fees, it is smart, IMO. There are other methods that can be used to meet minimum spending requirements using manufactured spending, but almost all involve some type of fee, and some work. For example, typically if you buy gift cards and purchase money orders, your costs will still be at least 1.5%, so 1.87% with no work involved is a very decent deal.
Bfwolf
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Bfwolf »

an_asker wrote: Mon Apr 23, 2018 3:10 pm
Derivative wrote: Mon Apr 23, 2018 2:14 pm Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

I am looking to open some new credit cards for their rewards and need to spend at least $3k in 3 months for some of them. I am wondering if it is stupid or smart to pay estimated business taxes with credit cards. The transaction fee is 1.87% and usually only takes a little off the reward that I get. Are there any other ways that are smarter to meet these minimum spending requirements?
I've done this.
I have too.

Obviously you want to use your fee-free organic spending first and foremost, but if you can get more credit card bonuses by paying estimated taxes with it, go for it. The credit card bonus value will exceed the tax payment fee.
Nearly A Moose
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Nearly A Moose »

I've done this once but wouldn't be inclined to do it again unless I got a great benefit from the card - not just points or miles (unless the points clearly could be cashed in for more than the transaction fee, which almost always won't be the case) - perhaps if I were on the cusp of airline status on a carrier I use frequently and I knew the tax payment would put me over the top. But unless you're a power card churner and really know how to fully leverage points, I don't think it's worth it. Points can be hard to use. I've been trying for years to unload about 300k American miles but can never make it work well enough to pull the trigger. YMMV
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Ron Ronnerson
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Ron Ronnerson »

I’ve paid property taxes to meet minimum spending. My county charges a 2.5% convenience fee for credit card transactions. My property taxes are $10k annually, paid in 2 installments. So I charge $5k and pay a $125 fee. I meet the minimum spending requirement to earn the bonus in one transaction this way. Additionally, $5k of charges would also earn points for those charges. The points earned may offset the convenience fee by a decent percentage. For example, with Chase cards, I’ve transferred the points that I earned to a travel partner and have sometimes been able to earn a rate of 2 cents per point. So I paid $125 for the fee but earned $100 back for the transaction. The bonus was worth more than $1k.
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Nate79
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Nate79 »

Which credit card? If AMEX, no I would not risk losing the bonus to the RAT team. If others in would only use it as last resort.
madbrain
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by madbrain »

Nate79 wrote: Tue Apr 24, 2018 12:33 am Which credit card? If AMEX, no I would not risk losing the bonus to the RAT team. If others in would only use it as last resort.
Paying taxes with AMEX is perfectly fine. See "how to meet the minimum spend" :
https://frequentmiler.boardingarea.com/ ... ar-gaming/
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Nate79
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Nate79 »

madbrain wrote: Tue Apr 24, 2018 12:45 am
Nate79 wrote: Tue Apr 24, 2018 12:33 am Which credit card? If AMEX, no I would not risk losing the bonus to the RAT team. If others in would only use it as last resort.
Paying taxes with AMEX is perfectly fine. See "how to meet the minimum spend" :
https://frequentmiler.boardingarea.com/ ... ar-gaming/
Even as that website says that you can overpay your federal taxes and get a refund. This is a typical cash equivalent. I know that it doesn't appear to be on the AMEX radar yet but that is not a risk I would be willing to take considering the aggressive nature of AMEX RAT team. It could also be a red flag of that was the only charge to meet the spend level.

It's a well known MS. It's fine until it's not.
madbrain
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by madbrain »

Nate79 wrote: Tue Apr 24, 2018 12:55 am Even as that website says that you can overpay your federal taxes and get a refund. This is a typical cash equivalent. I know that it doesn't appear to be on the AMEX radar yet but that is not a risk I would be willing to take considering the aggressive nature of AMEX RAT team. It could also be a red flag of that was the only charge to meet the spend level.

It's a well known MS. It's fine until it's not.
You can ask Amex yourself. I have personally asked them in the past if payments through a payment service such as Plastiq was OK, and they told me that it was. I also don't buy the argument that making a tax payment is a cash equivalent.
h82goslw
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by h82goslw »

I’ve paid income taxes and property taxes on credit cards several times. Did it in December and January to meet minimum spend to achieve Southwest companion pass status.
Cost me about $400 in fees....but airline tickets for two trips this year that would’ve cost me $3700 are now free. And I’ll have companion pass status until 12/2019.
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blaugranamd
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by blaugranamd »

Bfwolf wrote: Mon Apr 23, 2018 3:31 pm
an_asker wrote: Mon Apr 23, 2018 3:10 pm
Derivative wrote: Mon Apr 23, 2018 2:14 pm Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

I am looking to open some new credit cards for their rewards and need to spend at least $3k in 3 months for some of them. I am wondering if it is stupid or smart to pay estimated business taxes with credit cards. The transaction fee is 1.87% and usually only takes a little off the reward that I get. Are there any other ways that are smarter to meet these minimum spending requirements?
I've done this.
I have too.

Obviously you want to use your fee-free organic spending first and foremost, but if you can get more credit card bonuses by paying estimated taxes with it, go for it. The credit card bonus value will exceed the tax payment fee.
Same

Paid my federal taxes on my CC to hit the spending requirement to get 100k Amex points.
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dbr
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by dbr »

soccerrules wrote: Mon Apr 23, 2018 2:44 pm I would not do it. It's cost you money to pay your taxes. I would find other spending options that don't cost you to charge.

I would buy everything else on CC (Food/dining, gas, utilities,charitable giving). I would think you could spend $1000/mo without much effort.

You may need to move some charges from another cash back card to meet this 3 month bonus- and then move them back - i don't know.

I am by no means an expert at the sign-on /switch cash back bonus card game.
The little bit of fee charged is minimal compared to the benefit in miles awarded in most cases. But here is the Wiki on that: https://www.flyertalk.com/forum/credit- ... -card.html
an_asker
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by an_asker »

h82goslw wrote: Tue Apr 24, 2018 4:52 am I’ve paid income taxes and property taxes on credit cards several times. Did it in December and January to meet minimum spend to achieve Southwest companion pass status.
Cost me about $400 in fees....but airline tickets for two trips this year that would’ve cost me $3700 are now free. And I’ll have companion pass status until 12/2019.
I'm curious - which trips on SW would cost you $1,850 apiece?! :confused
michaeljc70
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by michaeljc70 »

I would hate to pay the fee. I would buy gift cards for places I go frequently. Grocery stores, gas station, restaurants, retail stores, etc.

One interesting thing I haven't fully explored is overpaying things you can for free like cable or Internet.
dbr
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by dbr »

michaeljc70 wrote: Tue Apr 24, 2018 10:35 am I would hate to pay the fee. I would buy gift cards for places I go frequently. Grocery stores, gas station, restaurants, retail stores, etc.

One interesting thing I haven't fully explored is overpaying things you can for free like cable or Internet.
If the required spend is, for example, $4000 or so, taxes is a pretty simple way to manage it. If people don't like paying off income tax, then property tax might be an opportunity for some people. Gift cards open their own can of worms. Overpaying, cable, internet, gas and electric, etc. does work also.
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Pajamas
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Pajamas »

This is a good example of the tail wagging the dog.
LarryAllen
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by LarryAllen »

sounds like a big hassle to break even.
michaeljc70
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by michaeljc70 »

dbr wrote: Tue Apr 24, 2018 10:42 am
michaeljc70 wrote: Tue Apr 24, 2018 10:35 am I would hate to pay the fee. I would buy gift cards for places I go frequently. Grocery stores, gas station, restaurants, retail stores, etc.

One interesting thing I haven't fully explored is overpaying things you can for free like cable or Internet.
If the required spend is, for example, $4000 or so, taxes is a pretty simple way to manage it. If people don't like paying off income tax, then property tax might be an opportunity for some people. Gift cards open their own can of worms. Overpaying, cable, internet, gas and electric, etc. does work also.
Typically, I think if overpaying a "utility" they might send you a check back eventually (like if they are closing their books they don't want to show a liability to you). I wonder though if you made a $500 payment to AT&T for $40 a month Internet, what they would do. If they refund back to the card, it could screw up your bonus.
Chicago60
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Chicago60 »

The answer to your question is it depends on whether you can otherwise meet the minimum spending elsewhere to get the bonus. The delta for profiting on getting the bonus is too small if you have to pay a fee for charging the card for income tax payments, but if you have no choice, then you have no choice--or maybe you should not have obtained the card in the first instance. I never have a problem so I have never paid income tax with my credit cards. Additionally, I "overpay" cable (Xfinity) and cell phone (Verizon) bills to meet minimum spend for each new credit card for the bonuses. I also use the appropriate credit card for auto and homeowner insurance payments.
madbrain
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by madbrain »

LarryAllen wrote: Tue Apr 24, 2018 10:51 am sounds like a big hassle to break even.
Sounds like somebody does not understand how much those signup bonuses are worth.

The value of a $600 signup bonus for $3000 is fairly typical these days if you fly coach. If you are flying business or first, the bonus could be worth much more, potentially.
1.87% of $3000 would be $56.1 . Where else can you get a 10:1 return on your money for this little effort ?
Traveler
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Traveler »

an_asker wrote: Tue Apr 24, 2018 9:58 am
h82goslw wrote: Tue Apr 24, 2018 4:52 am I’ve paid income taxes and property taxes on credit cards several times. Did it in December and January to meet minimum spend to achieve Southwest companion pass status.
Cost me about $400 in fees....but airline tickets for two trips this year that would’ve cost me $3700 are now free. And I’ll have companion pass status until 12/2019.
I'm curious - which trips on SW would cost you $1,850 apiece?! :confused
That's exactly what I thought when I read that comment
michaeljc70
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by michaeljc70 »

Traveler wrote: Tue Apr 24, 2018 8:01 pm
an_asker wrote: Tue Apr 24, 2018 9:58 am
h82goslw wrote: Tue Apr 24, 2018 4:52 am I’ve paid income taxes and property taxes on credit cards several times. Did it in December and January to meet minimum spend to achieve Southwest companion pass status.
Cost me about $400 in fees....but airline tickets for two trips this year that would’ve cost me $3700 are now free. And I’ll have companion pass status until 12/2019.
I'm curious - which trips on SW would cost you $1,850 apiece?! :confused
That's exactly what I thought when I read that comment
Maybe that's when you bring your emotional support peacock on board.
Bogle_Bro
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by Bogle_Bro »

With a massive roi it would be stupid not to
LarryAllen
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by LarryAllen »

madbrain wrote: Tue Apr 24, 2018 6:22 pm
LarryAllen wrote: Tue Apr 24, 2018 10:51 am sounds like a big hassle to break even.
Sounds like somebody does not understand how much those signup bonuses are worth.

The value of a $600 signup bonus for $3000 is fairly typical these days if you fly coach. If you are flying business or first, the bonus could be worth much more, potentially.
1.87% of $3000 would be $56.1 . Where else can you get a 10:1 return on your money for this little effort ?
Math seems fuzzy but whatever works for you.
madbrain
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by madbrain »

LarryAllen wrote: Tue Apr 24, 2018 9:30 pm Math seems fuzzy but whatever works for you.
The math is very sound. But since you live in the "State of Confusion", I am not sure how I could better explain it to you.
solobuildingblogs
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Re: Smart or Stupid? Paying taxes with credit card to satisfy minimum spending requirements.

Post by solobuildingblogs »

Definitely smart to spend to get the initial bonus. This way you don't have to keep track of how much you spend, possiblity of missing initial spend to get bonus. Almost ALL initial sign up bonuses easily justify the card. If you are getting 50,000 airline miles, that's worth about $600-700. For a $3000 initial spend, paying taxes at the 1.87% convenience fee is $56. Paying $56 for $600-700 is a winning proposition any day.

Indeed, the new AMEX ascend converted from Citi Hilton reserve gives two free nights- first for meeting $10,000 spend then second night for meeting $15,000. Charging $15,000 on taxes cost me $281 AND I got 45,000 Hilton points. Three free nights is worth at least $800 in my book easily justifying the $281 fee.

disclaimer: I'm self employed so pay lots in estimated taxes
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