It's important to pay your taxes to avoid interest and penalties. But using a credit card can be costly as well. What's the best move for cash-strapped taxpayers this month?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, runs through the pros and cons of using a credit card. Dan notes that not paying the IRS incurs underpayment interest of 3% annually plus a 1/2% monthly failure-to-pay penalty. Yet Dan also notes that credit card payment fees range from 1.87% to 2.35% upfront, not including the interest charges you might have to pay on your card. As a result, Dan concludes that in some cases, not paying might actually cost less than using a credit card, but you have to be careful in navigating the IRS's ability to collect taxes.