56. Making Taxes Part of Your Points Strategy

Welcome to Point Me to First Class, the only show for employed professionals, entrepreneurs, and business owners who are looking to optimize their higher-than-average expenses to travel the world. I'm your host, Devon Gimbel, and I believe that your expenses are your greatest untapped asset if you know how to leverage them. Ready to dive into the world of credit card points and miles so you can travel more, travel better, and travel often? Let's get started.

Hello, everybody, and welcome back to the podcast. For those of you listening to this episode in real time, it is Monday, March 25, which means that if you're based in the US or are a US citizen living out my dream of living abroad then you're quickly approaching a very important time in our financial lives. That is tax time.

I have all sorts of thoughts about how taxes work in the US, what our tax money gets used for that I wish it wouldn't, and all the myriad social services that I wish our tax money supported, but doesn't. But that's not really relevant or probably of any particular interest to you all. Regardless of what any of us thinks about paying taxes, my perspective is that if it's something we're going to have to pay, and especially if our tax bill is high, then we may as well take advantage of the opportunity to earn as many points as possible. 

Paying taxes represents probably the single largest overhaul expense that I have on an annual basis. So it plays a crucial role in my points plan. If you're a higher earning employed professional or a self-employed business owner, your tax expenses can represent an enormous points earning opportunity for you as well. 

But there are a few things that you have to know and understand before you can decide if and when it's the right move for you. Because the truth is paying taxes by credit card will not be right for everyone. I want to help you confidently decide whether it makes sense for you to pay your taxes by credit card, how to maximize taxes as a points earning opportunity, and what you need to keep in mind between now and tax day to put yourself in the best possible position to make the most of your tax payment. 

Now I first talked about paying taxes by credit card way back on episode number six and number seven last year. So if you're new to the podcast and haven't checked out those episodes yet, don't worry. I'm going to cover all of the important things you need to know in today's episode. 

For those of you who are all caught up, there's still something for you in today's episode, including updated current credit card processing fee rates, my top credit card picks for making tax payments this year, including why for the first time ever I'm changing the card that I use for my tax payments, and what you need to do between now and tax day to ensure that you are in the best position possible to reap the rewards of paying your taxes by credit card. 

I'm also going to cover the three key decisions that you need to make before paying taxes by credit card, and the top mistake to avoid to ensure that your tax payment points earning plan doesn't get derailed. We've got a lot of ground to cover. 

But before we get started, I do want to remind you all that I am not an accountant or a certified financial or tax professional. Therefore, please always do check with your own accounting, financial, and tax professionals before making any decisions about what's best for you regarding the information that I'll be sharing about paying your taxes with a credit card. 

So first things first, let's talk about how do you actually go about paying your taxes using a credit card? It is really easy to submit tax payments online using a credit card. Nothing here has fundamentally changed from last year. So to pay your federal taxes online using a credit card, you simply go to the website www.irs.gov. We'll be sure to link that website in the show notes and the episode description so that you can easily find it and reference it. 

But once you've done that, you want to click on the tab at the top of the page that says pay and then choose the option that says pay by debit card, credit card, or digital wallet. For paying federal income taxes you have a choice of three different payment processing platforms for submitting your tax payment online using a credit card. These are payUSAtax, Pay1040, and ACI Payment Inc. 

What you will notice is that regardless of which payment processing platform you choose, you will have to pay a fee in order to make your tax payment by credit card. Depending on the payment processing platform that you choose, that fee is going to range from 1.82 to 1.98%. These fee rates are just slightly different than they have been in the past. 

When you pay taxes by credit card online, your total payment is going to include your tax bill plus the processing fee. So if you're making a $1,000 tax payment at a 1.82% fee rate, you'll be paying $18.20 in fees, and your total tax bill will come out to $1,018.20. If you're making a $10,000 tax payment at a 1.82% fee rate, you'll be paying $182 in fees, and your total bill will come to $10,182. If you're making a $100,000 tax payment at a 1.82% fee rate, you'll be paying $1,820 in fees, and your total tax bill will come to $101,820. You get the idea.

The IRS actually allows you to use up to two different credit cards per payment per tax period per payment processing platform. So you can theoretically split up your tax payment between six different credit cards if you want to. I personally don't do that, but there are a few reasons why you may actually want to use more than one credit card for your tax payment. We're going to get into that a little bit later in the episode. 

You can also choose to pay a portion of your taxes by credit card and then make the remainder of your payment by cheque or bank transfer if you want. Though, of course, you're not going to be earning any points for any portion of your payment that you make using a payment method other than a points earning credit card. 

Actually making your tax payment online using your credit card is very easy once you've chosen which payment processing platform you want to use. All you have to do is follow the prompts and enter your identifying information like your name, date of birth, social security number, and credit card information and confirm that you want to submit payment using a credit card. 

While you will be given the option to print a receipt of your tax payment submission, I also recommend always taking screenshots of your tax payment confirmation and saving that for your records. That's it. Once you submit your payment, you're good to go. 

But just because you can pay your taxes using a credit card in order to earn points or miles doesn't mean that you necessarily should, or that it's going to be the right decision for you. Just because it might be a great decision for you to make your tax payments by credit card one year, that doesn't mean that it's always going to be the best fit for you in subsequent years. So how do you know if it makes sense to pay your taxes online using a credit card in order to earn points or miles considering that you will have to pay a processing fee in order to use your credit card to make your tax payment?

Very simply put, I think it makes sense to consider paying your taxes using a rewards credit card if you can get more cash equivalent value from the points that you're going to earn using your credit card to pay your taxes than the cost of the actual processing fee that you're going to be charged to pay your taxes by credit card. It would never make sense to pay 100 or $1,000 or more in processing fees to pay your taxes using a credit card if you couldn't get 100 or $1,000 or more in value from the points that you would earn for that charge, right. 

In fact, I think most of us probably wouldn't bother paying our taxes with rewards credit cards to earn points unless we knew that we could get substantially more cash value from the points that we earn then the cost of the processing fee we have to pay. That's because even though points are amazing, liquid cash still beats points in terms of flexibility. 

This is where it is so important to do the math for yourself so that you can make an objective determination about whether paying your taxes using a credit card in order to earn points makes sense for you. So let's walk through that math now.

In order to determine if it's worth it for you to pay taxes by credit card so that you can earn lots and lots of points, you will need to calculate these three things. Number one, the cost of the fee that you're going to be charged to pay your taxes by credit card. To do this you just multiply your tax bill by the percentage processing fee charged by the payment processing platform that you are going to use to make your payment. 

Number two, how many points you'll earn by making your tax payment with your rewards credit card. Remember that you're going to earn points on the total amount charged to your rewards credit card, which includes both the tax payment itself and the cost of the processing fee. 

Number three, you need to calculate how much value you will need to get from the points that you earn on your rewards credit card from your tax payment in order to break even and ideally exceed the cost of the processing fee. If the points that you earn from using a credit card to pay your taxes are going to be worth less than the cost of the fee, then there is no compelling reason to use a credit card. You'd just be better off paying by cheque or bank transfer. 

Now, in my opinion, again, it only makes sense to pay a processing fee in order to use a credit card for a given expense if you have high confidence that you're going to get much more value from the points that you earn for that payment then the cost of the processing fee you have to pay. It's not my goal to just break even. So let's take an example and walk through those steps so that you can see how this might look in real life. 

Now for folks listening to this show, there is going to be a huge range in what your tax payment might look like come April. Some of you may have a four figure tax bill. Others are going to have five or multiple five figure tax bills. Some of you will have six figure tax bills. Whatever your tax situation, you can use this example as a framework and then adjust the numbers to do the math yourself. 

So let's just say that you have a $15,000 tax bill that's due in April. This is what the math looks like walking through the three steps that I just described. First, step one, is to calculate the cost of the processing fee that you would be charged to pay the taxes using a credit card. The three different online payment processing platforms for federal taxes currently charge processing fees of 1.82, 1.87, and 1.98%. 

So I'm just going to split the difference and use that middle number, 1.87%, as the processing fee for calculating this example. A 1.87% processing fee charged to pay a $15,000 tax bill using a credit card would equal $280.50 in fees for a total tax payment of $15,280.50. 

Step two is to calculate how many points you're going to earn by making that entire payment by credit card. Now, this, of course, depends on the specific points earning rate of the rewards card that you choose to make your tax payment. 

If you use a credit card that earns one point for every dollar spent, a $15,280 tax payment is going to earn you 15,280 points. If you use a credit card that earns 1.5 points for every dollar spent, a $15,280 tax payment would earn 22,920 points. If you use a credit card that earns two points for every dollar spent, a $15,280 tax payment is going to earn 30,560 points. Clearly it is advantageous to have a rewards credit card that will earn more than one point per dollar spent in order to maximize the number of points that you can earn by paying your taxes with a rewards credit card. 

Unfortunately, there are currently no rewards credit cards that have tax payments themselves as a bonus category to earn points. But there are several great rewards credit cards that offer more than one point per dollar spent for all what's called non bonused or non-category spend. That is what you would want to reach for when making a tax payment to earn the highest number of points possible. 

Finally, step number three, we need to calculate how much value you will need to get from the points that you earn on your rewards credit card from your tax payment in order to break even and ideally exceed the cost of the processing fee. Here's how to do that. 

Remember that for a $15,000 tax bill, a processing fee of 1.87% will equal $280.50 in fees. All we have to do is divide the cost of the fee, $280.50, by the number of points we expect to earn using a rewards credit card for a tax payment to calculate how many cents per point in value we need to get from our points when we go to use them in order to get more value from them than the cost of the fee that we paid. 

If you use a credit card that earns one point per dollar spent, again, you would earn 15,280 points for your $15,280 tax bill. At that rate, you would need to get at least 1.8 cents per point of value from your roughly 15,000 points earned in order to book travel worth as much as the cost of the processing fee. Now to calculate the cents per point value needed to break even, all I did was divide the cost of the processing fee, which is $280.50 by the total number of points earned using a credit card that earns one point per dollar spent, which in this case is 15,280. 

Now a very logical thing to wonder at this point is how reasonable is it to actually get 1.8 cents per point of value from your points. Because if that's something that's really, really easy, then you're probably going to be much more likely to consider using a rewards credit card to pay your taxes, even taking into account having to pay a processing fee in order to do so. But if getting 1.8 cents per point of value out of your points is really, really difficult, then it would be much less compelling a consideration to pay your taxes using a credit card. 

If you have never redeemed your points for travel before and have no desire to learn how to get increased value from your points, or if you only ever want to redeem your points through your credit cards travel portal, then it will be very difficult, if not impossible, to get more than one to one and a half cents per point in value from your points. So I would argue that if you fall into that category, it would not make sense for you to use a credit card to make your tax payment in order to earn points. 

But once you learn some strategies to get increased value from your points, I think it's very reasonable to get 1.8 cents per point or more value from your points. Regarding that example that I just walked through. There are two crucial assumptions to note. First, the credit card used for the tax payment is earning only one point per dollar spent. Second, the credit card used to pay the taxes is one that you've held long enough to have already earned the signup bonus or the welcome bonus on prior to making your tax payment.

In reality, you can earn far more points from your tax bill when you use a rewards credit card that earns more than one point per dollar spent, and/or you use your tax payment to help you earn the signup bonus or welcome bonus on a new rewards card. In either of those situations, or when both apply, you can earn far, far more points for your tax bill. 

So let's consider the same tax bill scenario, but where you use a credit card that earns 1.5 points per dollar spent instead of just one point per dollar spent. In that case, you would earn 22,920 points for your $15,280 tax payment. But the processing fee stays the same at $280. 

So at that points earning rate, you're only going to need to get 1.2 cents per point in value to get more cash equivalent value from your points then the cost of the processing fee. 1.2 cents per point in value might not sound a lot lower than the 1.8 cents per point redemption value that we looked at in the first scenario, but it's actually quite significant. I think that it is exceedingly easy to get more than 1.2 cents per point in value from your points. 

For example, those 22,920 points that you can earn by making your $15,000 tax payment with a rewards credit card that earns 1.5 points per dollar spent can be used to fly economy class one way from the US to Europe. A flight that otherwise would probably cost a lot more than $280 to book in cash. In fact, 22,920 points are almost enough for a roundtrip Economy Class flight from the US to Europe, which I think is a fantastic trade for paying just $280 in processing fees to pay a $15,000 tax bill. 

The math is even more favorable if you have a rewards credit card that earns two points per dollar spent. At that points earning rate, a $15,000 tax bill would earn you 30,560 points, the same processing fee of $280. In order to get more than $280 in value from 30,560 points you would only need to get 0.9 cents from each of your points in order to break even. Honestly that's an absolute piece of cake.

As one example, 30,000 Chase points could book you one night at the popular Andaz Papagayo resort in Costa Rica where base level rooms can easily cost $1,500 to $2,000 or more per night if you're traveling during peak travel time, significantly more value than the $280 processing fee that it would cost to earn those points by paying your taxes with a credit card. 

So not only can you optimize your points earning for tax payments when you strategically use a rewards credit card that earns more than one point per dollar spent, but getting a new points earning card and using your tax payment to earn the signup bonus or welcome bonus on that card can dramatically increase the points earning potential of a tax payment. 

Here's one current rewards card welcome offer that I think makes paying taxes using a credit card an absolute no brainer. Floating around right now there is an offer on the American Express Business Platinum card where you can earn 250,000 American Express points after spending $15,000 on the card in three months. Now this offer is not available just by going through American Express's main website. You won't find it there. You do have to find this offer online. But if you do, this can be an amazing value because this is an incredible welcome offer. 

Even better, the Amex Business Platinum Card earns one and a half points on any individual charge that's $5,000 or higher. So that $15,000 tax bill from our example would earn a total of 272,920 Amex points, which is kind of unbelievable. That is a points earning rate of 18 points per dollar spent. 

Now I think that Amex points are conservatively worth two cents apiece. So 272,920 Amex points could easily be worth almost $5,500 in travel. So doing the math, what do you think? Would you be willing to pay $280 in fees in order to earn enough points to book $5,500 in travel?

Here's another scenario for how you can leverage a tax payment to earn more than a new card welcome bonus. Remember that you can actually split up a tax payment between more than one credit card since each online payment processing platform allows you to use two different cards, and there are three different payment processing platforms. 

So you can get two new personal cards. Let's say the American Express Personal Gold card and one of the flavors of the Capital One Venture cards and use the tax payment to meet two minimum spend requirements and to earn two welcome bonuses. 

The Amex gold card has some referral offers where you can earn 90,000 points after spending $4,000 in six months, and both the Capital One Venture rewards and Capital One Venture X rewards cards offer a welcome bonus right now of 75,000 points after spending $4,000 in three months. With a $15,000 tax bill, you could easily pay $4,000 on the Amex gold card and $11,000 on a Capital One card and walk away with around 94,000 American Express points and a little over 97,000 Capital One points for just $280 in processing fees. 

In case you can't tell, I think using a tax payment to earn the welcome bonus on one or more rewards credit cards more than justifies the cost of the processing fee. Assuming, of course, that you have the liquidity to pay off all your credit card statements in full every single month, including large tax bills.

When it comes to paying taxes by credit card, my top pick for which card to use would be a new rewards card or cards where you can use your tax payment to earn the sign on bonus for that card. Simply because in this scenario, you can easily earn five to 10 points per dollar spent or more, giving you a huge bang for your tax book in terms of points earning. At this rate, you stand to get exponentially more value from the points that you earn paying your taxes by credit card than the cash equivalent cost of the processing fee. 

Now, depending on how frequently you pay taxes and how much you pay in taxes, you might be in the situation where you don't actually want to rely solely on using new credit cards to pay your taxes in order to earn a signup bonus. That's because this approach isn't as practical if you have very high tax payments. 

Because in order to fully leverage a tax bill of multiple tens of thousands of dollars or more every time you have taxes, you could theoretically need to apply for and earn four or more signup bonuses on new credit cards every single time you pay taxes. Even I don't think that that sounds particularly appealing or sustainable. Or you could also just be happy with your current rewards credit card portfolio, and not want to open new cards just for the purposes of paying taxes. That's no problem. There are still two other categories of rewards cards that can be useful for making tax payments even if you're not going to be earning a new card welcome bonus.

Rewards cards that earn more than one point per dollar spent on non-category spend and airline or hotel co-branded cards where your tax payment can help you earn or maintain a level of status within a loyalty program that you value can also be great considerations for paying your taxes. 

So let's look at rewards cards that earn more than one point per dollar spent on non-category or non-bonus spend first. Even if you don't open a new rewards card to make your tax payment, you can still come out ahead by paying your taxes with a credit card if you use a personal or business card that earns more than one point per dollar spent. That's because at that points earning rate, you can almost always get more cash value from the points that you earn by paying your taxes with a rewards card than the cost of the processing fee that you have to pay. 

The good news is that there are many great rewards credit cards that offer one and a half points or two points for every dollar spent that you can use to pay your tax bill, whether it's a few hundred dollars or lots of thousands of dollars. 

Examples of personal rewards credit cards that earn more than one point per dollar spent on non-category or non-bonus spend include the Chase Freedom Unlimited card, which earns 1.5 points per dollar spent, the Citi Double Cash-back Card which earns two points per dollar spent, and the Capital One Venture Rewards and Venture X Rewards cards that also earn two points per dollar spent. 

Examples of business cards that can earn more than one point for every dollar you spend on non-category or non-bonus spend include the Chase Ink Business Unlimited card, which earns one and a half points per dollar spent, the American Express Blue Business Plus card that earns two points per dollar spent up to $50,000 spent annually, and the Capital One Spark Miles Select or Business Venture X cards which also earn two points per dollar spent but don't have that same cap on how many points you can earn. 

Which one of these cards is going to be the best choice for you is going to depend on your personal preference for how you want to use your credit card points for travel as they each have their own set of airline and hotel transfer partners that you can utilize their points on in order to book travel. 

Now for years my go to rewards card for paying taxes has been the American Express Business Platinum card for its 1.5 times points earning rate on expenses over $5,000, which fortunately or unfortunately my taxes always are. But also because the ability to put large charges on the card given that it has no preset spending limit. 

But this year, my tax payment strategy has taken a turn because of one very specific point earning opportunity. That is the ability to earn three points per dollar spent on all non-bonus spend using the Chase Freedom Unlimited card with double cash-back promotion. 

So ordinarily, the Chase Freedom Unlimited card earns 1.5 points per dollar spent on all non-category spend, making it a really strong contender for paying taxes. But late last year, Chase offered this card with a special promotion that effectively doubles its cash-back or points earning rate for one year. 

Now I jumped on that offer pretty much as soon as I heard about it, anticipating that it would become my go to card for all of my non category spend this year, and at an earning rate of three points per dollar spent, I'm even more excited than usual to pay taxes. 

Now this specific card promotion is no longer available to new applicants. So if you didn't happen to take advantage of it already, don't worry. There are still lots of other great points earning cards that you can lean on for your upcoming tax payment. If I didn't have this specific card, my personal top two picks of cards to use for my tax payment would include, again, my go to favorite the American Express Business Platinum card, but also the Capital One Venture X Business card. So not the personal version of the card, but the business version of the card. 

The Capital One Business Venture X card earns two points per dollar spent, and this is a card that was actually not widely available on the market this time last year, which is why I didn't consider it and just went ahead and used my Amex business platinum last year. But this year, I think that there are even more great options rewards cards that can be used to earn points for your upcoming tax payment. 

All right after new cards that can earn a hefty welcome bonus and cards that give elevated points earning on non-bonused spend, the third and final category of rewards credit card that can be fantastic for paying your taxes is an airline or hotel co-branded credit card where your tax payment can help you earn or maintain a level of status within a loyalty program that you value. 

Many airline and hotel specific credit cards, like an American Airlines credit card or a Hyatt Hotel credit card, allow money spent on that credit card to earn perks or benefits within that loyalty program or help you earn status in that program that can make your flights or hotel stays even more enjoyable. 

Now, unlike the first and second categories of credit cards that we just talked about, the value of using an airline or hotel co-branded credit card to pay your taxes is not really in the points themselves that you're going to earn, though, of course, those are still useful. 

That's because an airline or hotel specific credit card will most likely only be earning you one point or one mile per dollar spent on your taxes. There are some exceptions to this, but the majority of airline and hotel co-branded cars are only going to be earning you one point per dollar spent. Rather, the value of using this type of card to make your tax payment lies in the value that you can get out of the specific benefits or increased status within that particular loyalty program. 

One example is the world of Hyatt business credit card, which allows you to use credit card spend to earn qualifying nights towards different tiers of status in their loyalty program, including the top tier of status, which is called globalist status. Globalist status with Hyatt Hotels is one of the most valuable top tier hotel statuses out there. Personally, it has allowed me to save literally thousands of dollars each year through benefits like sweet upgrades, waived resort fees, free breakfast for up to four people every single day of your stay, and free parking. 

Normally, you are required to stay in Hyatt properties 60 nights per year in order to earn or maintain globalist status. But if you have a Hyatt credit card, your spend on that card will also help you earn qualifying nights that count toward that 60 night threshold because the world of Hyatt business credit card rewards you with five qualifying nights towards earning status in their program with every $10,000 that is spent on the credit card. 

Now that means that if you wanted to, you could actually earn highest top to your globalist status through credit card spend alone by putting $120,000 of expenses on the Hyatt business card in order to automatically earn 60 qualifying nights that would earn you globalist status. Now, I am not suggesting that that is a particularly great strategy by itself to earn status since if you're someone who's not staying in Hyatt Hotels and earning any qualifying nights that way, you're probably also not someone who's really going to benefit from having top status in their program just through credit card spend. 

But the point is, if you value top tier status in a hotel program like Hyatt and you can't qualify for that tear of status just with the hotel stays that you've planned for that year, using credit card spend to get you the rest of the way there can be a really strategic way to leverage an expense like a tax bill. 

Another example of using your tax payment to help you earn status is with airlines specific credit cards. Many airlines will reward you with certain perks, benefits, or status in their frequent flier programs when you put certain increments of spend on their credit cards.

For example, the Citi Advantage Executive World Elite credit card, which is one of the premium American Airlines credit cards, allows you to earn one elite qualifying loyalty point in their frequent flyer program for every dollar you spend on the card and additionally rewards you with 10,000 extra loyalty points when you spend $40,000 on the card in a qualifying year. 

So if you paid a $40,000 tax bill with this credit card, you’d earn over 50,000 loyalty points in American Airline’s frequent flyer program, which is enough alone to secure Gold Level status. That gives some nice perks when flying American Airlines, including access to priority check in, a free check bag when you travel, and priority boarding. 

Now if you are a relatively casual traveler and are not particularly loyal to any specific airline or hotel then using credit card spend to earn status in one of these loyalty programs probably isn't going to be terribly useful for you. Rather, this approach of leveraging credit card spend to help boost your status makes more sense if these two criteria apply to you. 

First, if you do prioritize flying with one particular airline or staying in one particular hotel chain and are not trying to earn status from scratch with your credit card spend alone then using a tax payment to accelerate your path to status can make sense, especially if you're just one status tier away from unlocking certain perks or benefits with an airline or hotel loyalty program that really appeal to you and that you would value having access to when you travel. 

Second, if you tend to have high tax bills, meaning multiple five year tax bills or six figure tax bills, putting some or all of your tax payment on an airline or hotel co-branded credit card can be a great fit. Because using credit card spend to help earn status often does require significant amounts of spend. 

Folks with high tax bills also need to take into consideration that your tax bill might be higher than the credit limit on any one of your individual rewards cards. This is a scenario where using a charge card that earns points can come in very handy. Remember that charge cards differ from traditional credit cards in that they do not have a preset credit limit. Meaning that you can potentially charge multiple five figures or even six figures on a charge card at once, but you cannot carry a balance on this type of card. So you have to be sure that you have the liquid funds to pay off the balance in full at the end of your monthly statement. 

Now, you shouldn't carry a balance no matter what on any points or any card, but this is especially true of charge cards. Because they don't have a traditional preset credit limit, charge cards can be really useful for paying single high expenses like a tax payment and not have to split up that charge over several different credit cards with lower credit limits if you don't want to. 

American Express offers some great points earning charge cards that can be really useful for paying taxes, including the personal American Express Platinum or Gold card and the Business Platinum or Gold card. Another great option of a charge card that you can use to pay taxes, as I mentioned before, is the Capital One business venture x card. Not only does this card have no preset spending limit, but it also earns two points per dollar spent making it a point earning powerhouse for large tax bills. 

The other thing to consider is that while many of the rewards credit cards that I mentioned today that earn more than one point per dollar spent do not have any cap on how many points you can earn with them, some rewards credit cards do. So you'll want to make sure that you don't exceed those points earning limits on your credit card with your tax payment. 

For instance, the Amex Business Blue Plus credit card that I mentioned earns two points per dollar spent, but only on up to $50,000 spent per year. Any expenses that are put on the card after you've hit that $50,000 limit would only earn one point per dollar spent. So you want to make sure that you don't put more than $50,000 of expenses total on that card. 

All right. Now that you know why paying your taxes can be a fantastic points learning opportunity, how to do the math to decide if paying the processing fee on a tax payment is worth the points that you will earn in return, and understand the three main categories of rewards cards that are great for paying taxes, let's talk about the three key decisions that you need to make to optimize your points earning on taxes and the top mistakes that you want to avoid so that your tax payment points earning plans don't get derailed. 

Decision number one, very simple one. Do you want to pay your taxes using a rewards credit card in order to earn points? If the answer to this is no then stop here. But if you do want to pay your taxes by credit card, decision number two is do you want to use one or more of your current rewards cards to make your tax payment? Or do you want to apply for a new card or cards to use your tax payment to help you earn a new card welcome bonus?

Finally, decision number three. What specific card or cards are you going to use to make your tax payment? Whether it's one card or multiple, prioritize allocating your tax bill spend based on which card is going to earn you the most amount of points for your payment or where your spend can give you the most benefit in terms of qualifying you for additional perks or benefits based on your points travel program loyalty priorities. 

Finally, here is the big mistake that you want to avoid when it comes to making your tax payment points earning plan, and that is waiting too long to put your plan in place. If you do want to get a new rewards card or cards in order to leverage your tax bill to earn you a new card welcome bonus, now is the time to decide which ones and submit your applications. 

At the time that this episode airs, we have about three weeks until your April tax bills are due. You want to factor into that timeline, the fact that some credit card applications will not be approved immediately, and it might take a few days or a week for your application to be processed and finalized.

Additionally, some credit card issuers, like Chase, like to take their sweet time mailing new cards out after the application has been approved. Getting your new card can sometimes take as many as seven to 10 business days in order to arrive. You do not want to be waiting until the last second for a new credit card to arrive in the mail to be able to make your tax payment online. So do yourself a favor and make sure to decide soon what your tax payment plan will be to ensure that you have the right cards in your hands with more than enough time to submit your payment. 

All right, everybody, that just about covers everything that you need to know about paying your taxes by credit card in order to earn points. Here is a quick recap of the key points. First, there is a cost to paying your taxes using a credit card, but it can still be worth it if the value of the points you earn is higher than the cost of the processing fee you pay to use a credit card to pay your taxes. It is so much easier to know whether it makes sense for you to pay your taxes using a rewards credit card to earn points, including paying that processing fee, once you do the math using your own numbers. 

Now I've walked you through examples of how to calculate for yourself the cost of the processing fee that you'll pay and how to determine how much value you would need to get from the points that you earn from your tax payment to offset the cost of the processing fee. But to make doing the math even easier, I created a free tax payment points earning calculator just for you. To get your tax payment points calculator, all you have to do is go to www.pointmetofirstclass.com/56, that's the number of this podcast episode. So www.pointmetofirstclass.com/56, enter in your email address, and it will be sent straight to your inbox. 

All you have to do is input in the amount of your tax payment, the points earning rate of the rewards card that you're going to use to pay your tax bill, and whether or not you're earning points from a welcome bonus by using a new rewards credit card for your tax payment. The calculator is automatically going to tell you the cost of the processing fee to pay your taxes, how many total points you're going to earn from your tax payment, and the value that you will need to redeem those points for in order to justify paying the processing fee.

Like I said, it's totally free, and it's yours when you go to www.pointmetofirstclass.com/56. Use the calculator to help you decide whether it's worth it to pay your taxes by credit card in order to earn points. 

Second, if you do the math and determine that it is worth it to you to pay your taxes by credit card, make a plan to leverage your tax payments so that you can earn the most points or get the most value from rewards credit cards possible with your tax payment. 

Third, if you have very high tax payments, there is an opportunity to leverage that expense by using more than one credit card to pay your taxes so that you can potentially earn several sign on bonuses or use your tax bill to help you earn increased status in an airline or hotel loyalty program that you value.

In this episode, I've tried to recommend some of the most high yield points earning credit cards to consider for your tax payment. But the truth is we've just scratched the surface of different ways to leverage a tax payment to earn points. Every person’s situation is different, and that is where getting a personalized points earning approach to paying your taxes or any other significant expense can make a world of difference. 

Now unfortunately, I can't make a personalized points plan for you on a podcast episode, but that is exactly what I do inside of my Points Made Easy course. So if you want my eyes on your credit card plan and want help crafting a personalized credit card portfolio that's specific to your spend and points travel goals, get on the waitlist now so you can be the first to hear when po Points Made Easy opens again for enrollment. You can do that by heading over to www.pointmetofirstclass.com/pointsmadeeasy. 

Finally, even if the timing isn't right for you to leverage rewards credit cards for this quarter or this year's taxes, use the information in today's episode to help plan for how you can maximize your points earning on future tax payments. I hope the information in this episode has started to change the way that you think about paying your taxes, especially if you have high tax bills. 

I know that it has really taken the sting out of paying taxes for me knowing that my taxes now earn me enough points for a fantastic business class flight somewhere or potentially multiple award flights. I hope that rewards credit cards will change your relationship to your tax bills too. So happy Tax Day, happy points earning, and I will see you all again back here same time, same place next week. Have a great week everybody. 

Thank you for joining me for this week's episode of Point Me to First Class. If you want more tips on turning your expenses into travel, visit pointmetofirstclass.com to learn more. See you next week.