For a long time, I thought paying a fee to use a credit card for tax payments was a total lose-lose. There are no points or miles that are regularly redeemable for 2.4% or higher and then there's the loss in flexibility when transferring cold, hard cash into a rewards program. However, I just paid my property taxes at this rate and I'm pretty excited about it.
Let me explain
Let's say my property tax payment was $3,000. At the 2.4% rate my local municipality is offering, I would have to pay $72 in fees for the privilege of using my credit card, instead of $1 for using a bank debit for the transaction. That means I spent $71 that I didn't need to spend. I used my new Barclay Arrival+ card, which earns 2 points per dollar everywhere, meaning I netted 6,000 Arrival points. I can redeem those points for travel at 1cpm, which means they are worth $60 to me (they're actually worth a bit more, but I'll keep things simple here).
On its face, I lost $11 in this transaction, plus some flexibility, because I have to spend that money on travel. I'm not too concerned about the flexibility because I travel a lot, plus there's another consideration. Since this card is new, I'm in the process of meeting the minimum spend of $3,000 to unlock 40,000 bonus points. Therefore, the first $3,000 I spend is actually worth 46,000 points, not 6,000!
The New Math
Now the equation becomes $460 earned at a cost of $71 for a return of $389. In one transaction I met my minimum spend, earned $389 worth of travel that I know I will put to good use, and freed myself up to pursue another lucrative credit card bonus.
Another way to look at paying your taxes would be to consider them an opportunity to discount your travel expenses. In this particular case, I would be earning $460 of travel at 84.5% off. Think about the last time you checked into a $70 motel (they're getting pretty rare in California) and now imagine upgrading yourself to a $460 suite at the nicer hotel downtown.
When trying to clear a card bonus or when using cards that offer 2% or better back, it really can make sense to pay that hefty credit card fee for your tax payments. I paid my local taxes at a 2.4% fee, but federal taxes can be paid for close to 1.9%, making a 2% back card a winner even without sign-up bonuses.
I also think it's important to be a good customer to banks that I open credit cards with, so the more I spend on cards, the more they profit from my business. In-between signing up for the best offers, I reward banks that I feel have offered me value by using their cards on my everyday spend.
As always, we have to weigh these options out for ourselves, but I'm certainly beginning to see the light!