Hidden costs of paying taxes by credit card

How to Avoid Credit Card Traps

With the IRS tax deadline approaching, some U.S. taxpayers are rushing to complete their 2015 personal tax returns and pay the money they owe. While some will mail in personal checks, others will turn to the Internet to make an online payment via debit or credit card, but consumers are urged to note what fees may be charged if they do so.

The IRS cannot legally pay any transaction fees on credit card payments. Because of this limitation, all taxes paid via credit card are done so through a third party, not the IRS itself. This means payers will be charged a convenience fee in addition to the transaction fee. For those who owe very little, this fee may be less than $3.00. However, those who owe more may pay as much as 2.25 percent of the amount owed. Each third party vendor charges different rates, so users should read all the information provided before entering their credit card details.

Those who are short on funds and unable to pay their taxes before the April 18 deadline may be tempted to pay by credit card. Experts warn, however, that the transaction fees plus the credit card company's interest charges could actually be more than the IRS would charge to set up an installment plan. Those who plan on applying for credit in the near future may also want to rethink their plan to pay their taxes on credit since it will increase their overall debt.

View the most important 2016 tax dates to know:

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Important tax dates to know
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Hidden costs of paying taxes by credit card

January 15, 2016: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Tetra Images/Getty Images)

April 18, 2016: Individual tax returns are due for the 2015 tax year

(Photo via Alamy)

April 18, 2016: Requests for an extension on filling out your taxes must be filed by this date

(Photo by Chris Fertnig via Getty Images)

April 18, 2016: Those who are self-employed or have first-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Alamy)

April 18, 2016: This date is also the deadline to make a contribution to an IRA account for 2015

(Photo by Garry L., Shutterstock)

June 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Shutterstock)

September 15, 2016: Those who are self-employed or have second-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo via Shutterstock)

October 17, 2016: 2015 tax returns that received an extension are due by this date

(Photo by Juan Camilo Bernal via Getty Images)

October 17, 2016: Today is the last chance to recharacterize a traditional IRA that was converted to a Roth IRA during 2015

(Photo via Getty Images)

January 15, 2017: Those who are self-employed or have fourth-quarter income that requires payment for quarterly estimated taxes must have them postmarked by this date

(Photo by Pascal Broze via Getty Images)

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