Could a 0% APR Card Help if You Can't Pay Your Tax Bill?

Here are the pros and cons of using a 0% APR card to pay your taxes.

Tax day for the 2021 filing season is fast approaching. This means if you owe money to the IRS for last year, you need to be ready to send in your payment by the April 18, 2022, due date. This is true even if you've requested an extension to file your taxes, as the bill still must be paid by the April deadline.

Unfortunately, some people simply don't have the money to send to the IRS on time. And if that's the case, failure to pay taxes could lead to penalties and interest that add significant costs.

If you find yourself in this situation, you may want to look into whether using a 0% APR credit card to pay your taxes could be a better approach than paying late or opting for an IRS payment plan. Here are the pros and cons to think about before you decide if charging your unpaid tax bill and paying it off over time is a good move.

Benefits to using a 0% APR card to pay taxes you owe

There are some definite arguments in favor of charging your taxes on a 0% APR credit card if you're not able to pay them in full.

The biggest benefit is that you will not have to pay interest or IRS late fees if you put your taxes on a card. A credit card offering an introductory 0% interest rate on purchases will give you a long time -- often 12 to 15 months -- to pay down your balance without any of your money going to interest. This means your debt is likely to be easier and faster to repay than if you had to cover fees and financing charges.

Putting your tax bill on a 0% APR card could also allow you to earn credit card rewards if your card offers them. This could help you to offset some of the costs you're facing.

Downsides of using a 0% APR card to pay taxes

Now, there are also downsides to this approach, so you'll want to think about these factors before you decide.

One big issue is that there's a fee to pay your taxes with a card. A third-party payment processor handles this transaction, and the fee hovers somewhere around 2% of the balance depending on the processor you use. This fee can offset some or all of the interest saved by not leaving your bill unpaid.

You'll also have a short time to pay off your tax debt. If you can't repay it before the 0% introductory rate expires, you'll end up paying a very high rate as expensive financing charges are common with credit cards. The standard rate could be well above what you'd pay under an IRS payment plan -- so your debt could be more expensive in the long run if you don't pay it back before the intro rate on your credit card ends.

You'll want to think about how quickly you'll be able to repay your tax debt once you've charged it on your card -- and research the best 0% APR credit cards that offer generous rewards -- to help you decide if this method of dealing with unpaid tax debt is right for you.