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March 14, 2000, 12:14 p.m. EST

Pros, cons of paying taxes with a credit card

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By CBS.MarketWatch.com

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Other alternatives might be taking the money from a savings account or obtaining a short-term loan at a lower interest rate. The IRS also accepts debit card payments.

"It pays to figure out how much each option will cost you," says Kidwell.

Even those who plan to pay off the balance, but just want the airline miles or cash back, might find their rewards negated by Official Payments' fee.

If you charge $10,000 to the GE Rewards MasterCard, you get a cash rebate of $135. But the fee for that tax payment is $262.

It takes an average of 25,000 airline miles to earn a free domestic plane fare. A $25,000 IRS charge might get you the ticket, but the fee for that is $699. If the card company levies an annual fee, which most do for flight rewards cards, you could end up paying $750 or more for the trip.

A credit card, however, can be a way to avoid severe consequences. People who are certain they can't meet the IRS's installment payments, or fear they will be late with payments or miss them, might want to consider plastic.

Better the credit card issuer than the IRS

"There may be some psychological or practical value to owing a credit card company rather than the IRS," says Kidwell. "When it comes to collecting a debt, the IRS has more options than your credit card company."

The IRS can seize your bank account, pinch your paycheck, or take other income or assets.

The IRS can seize your bank account, pinch your paycheck, or take other income or assets. A creditor or collection agency can't touch your holdings without a court judgment. Remember that taxes paid by credit card cannot be excused by filing bankruptcy.

With the tax deadline five weeks away, consumers still have time to figure out what they owe and how they are going to pay it. This year's deadline is extended two days, to April 17, because the usual filing date falls on a Saturday.

"This is not the time to procrastinate," says Suzanne Boas, president of Consumer Credit Counseling Service of Atlanta. "There may be a certain sense of dread in facing up to an IRS bill, but the sooner you can work out an acceptable payment plan, the sooner you will feel in control of your future."

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