When paying your taxes with a credit card Is a good move – and when it isn’t
Wednesday, March 26, 2014 at 10:38AM 
By Eliot Buchanan
Canadians have been able to pay their personal income (T1) taxes online for a while now, but up until last year, options were limited to online banking or debit – in other words, cash. It was only last year that Canada Revenue Agency provided the option for Canadians to pay their income taxes owed on a credit card, by recognizing Plastiq as a viable option for paying taxes.
Having the option to pay income taxes owed on a credit card is convenient and allows Canadians to maximize their rewards points on an unavoidable expense. However, this brings up the obvious question – when is it a good idea to pay your taxes with a credit card? And when is it probably not?
At Plastiq, we understand this payment method is perfect for some taxpayers – which is why we provide it as an option – but we also recognize it is not for everyone. The thousands of Canadians who made the choice to pay their income taxes to the CRA through Plastiq in 2013 and those who will in 2014, choose to do so for a number of reasons, but the most popular and beneficial scenarios include:
1) You want to earn the rewards of your credit card of choice on an expense you are already committed to.
Earning rewards on unavoidable or monthly expenses such as taxes, tuition, or utilities allows Canadians to earn points faster while staying within their spending budget. You can use the opportunity to pay taxes with a credit card to push your points total to where it needs to be for elite status or that next awards ticket.
2) You would like the convenience of paying your tuition, taxes, utility bills and more all through one quick and easy channel.
Taking the time to pay several different expenses in different methods can be a time-consuming pain. Your time is valuable so you can choose to pay all of these expenses on your credit card through Plastiq (as it’s the only way to do so for all of the above expenses). Between the card information storage, payment scheduling, and other Plastiq dashboard capabilities, you'll find you have more options than ever before. You pay the way you want and get back to your life.
3) You simply prefer to use your credit card.
You prefer to treat your credit card like a debit card and use it to pay for as much as possible, while paying off the balance in full on a monthly basis. This streamlines and simplifies keeping track of your expenses, and ensures you maximize and enjoy all of the benefits of your credit card that debit cards simply don’t offer.
With that being said, we would not advise you to take advantage of this service if:
1) You do not currently have enough funds to cover the cost of your taxes, and still won’t in 45 days.
If you do not plan on being able to pay off your credit card balance within a payment cycle, you should consider other options. The CRA offers the option of paying in instalments, with interest rates around 5%. Keep in mind that if your credit card has a rate less than what you would pay through the CRA, you may want to reconsider credit card payment.
2) The amount of money you owe in taxes is larger than your credit limit.
Just like any other credit card transaction, your tax payment through Plastiq will not be approved if the amount you are trying to pay exceeds the credit limit you have earned based on your credit score.
Being aware of your financial situation is critical when making any payment decision. Educating yourself on your interest rate, the benefits of your credit card rewards programs, and the payment options available to you, like Plastiq, can help you make informed payment decisions and take that vacation you've always dreamed of.
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