Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective.
Last year, when my tax bill ended up in the thousands, I decided to make the most of it by paying with a rewards credit card.
While you do have to pay a credit card processing fee that’s just under 2%, I figured that if I could earn enough credit card points, it might be worth paying the fee. I knew I needed to find a big welcome bonus to do this.
In the end, I earned 75,000 rewards points that are worth $750 in travel, and only paid around $60 in credit card processing fees. Here’s how I did it.
We’re focused here on the rewards and perks that come with each card. These cards won’t be worth it if you’re paying interest or late fees. When using a credit card, it’s important to pay your balance in full each month, make payments on time, and only spend what you can afford to pay.
How I chose a card with a good welcome bonus
I knew that it would only be worth paying my taxes with a credit card if I could meet a credit card bonus minimum spending requirement I wouldn’t otherwise be able to reach. Most credit cards require you to spend a certain amount of money in the first few months to earn the intro bonus, so I decided to look for a card with a hefty welcome offer and a large minimum spending requirement.
Amex Business Gold review: Are the rewards and benefits worth the $295 annual fee?
I ended up opting for the American Express® Business Gold Card
because, at the time, it offered 50,000 Membership Rewards points if you spent $5,000 in the first three months and another 25,000 points if your spending totaled $10,000 in the first six months (this offer is no longer available). A total of 75,000 Membership Rewards points was one of the most generous offers I’d ever seen on this card, and I knew that I’d be able to earn it with the help of my several thousand dollar tax bill.
Quick tip: The American Express® Business Gold Card currently has an elevated welcome bonus until April 7, 2021. You’ll earn 70,000 Membership Rewards® points after you spend $10,000 on eligible purchases within the first 3 months of card membership, and new cardholders can also earn up to $300 in statement credits in the first three months (terms and cap apply): up to $150 in statement credits toward eligible U.S. advertising purchases in select media, and up to $150 toward eligible U.S. shipping purchases (terms and cap apply).
Making sure the card has staying power
Another important factor was making sure the points I earned were valuable and easy to use. I wanted to be able to get at least 1 cent per point in value, which is what Membership Rewards points are worth when you use them to book flights, hotels, and more through Amex Travel.
The best rewards credit cards for paying taxes can earn you thousands of points, but do the math to make sure it’s worth it
Of course, I also wanted to make sure I could also use the points on my upcoming travels. I tend to prefer transferable points like Amex Membership Rewards and Chase Ultimate Rewards because you can redeem them in a variety of ways, and they even offer airline and hotel transfer partners for added flexibility and value.
It was also important that the rewards system aligned with my travel plans because I wanted to open a credit card that would offer me continued value beyond the bonus. For me, that means looking for a card that offers bonus points in categories that match my spending habits with a reasonable annual fee.
The American Express® Business Gold Card fit the bill for me because it offers 4x points in the two categories (from a list) where your business does the most spending, and that rewards rate plus the welcome bonus was enough to offset the $295 annual fee (See Rates).
I paid estimated quarterly taxes with a credit card despite the added fee, and unlocked a sign-up bonus worth at least $1,200
I’m also self-employed and preferred to open a small-business credit card. Not only would paying my small-business taxes with a business credit card help me keep my finances separate, but sticking with a business credit card also helps me limit the number of inquiries on my personal credit report.
This is particularly helpful for me as a Chase credit card fanatic, as Chase’s 5/24 rule dictates that you won’t be approved if you’ve opened five or more credit cards, from any bank, in the past 24 months. Most small-business credit cards do not count toward the five-card limit.
Rewards cards that are good for paying your taxes
The American Express® Business Gold Card might be a good option for you, even though it’s got a different bonus now than when I went for it last year. Luckily, there are a handful of other credit cards that currently have very generous offers out there.
The Business Platinum Card® from American Express
, for example, is currently offering 85,000 Membership Rewards® points after you spend $15,000 on eligible purchases within your first 3 months of card membership. Plus, new cardholders can earn 5x points on eligible US purchases on shipping, wireless telephone services, advertising in select media, office supplies, and gas stations in the first three months of account opening, up to 80,000 bonus points per category (Eligibility for these offers is limited. Enrollment is required in the Amex Offers section of your account before redeeming).
Amex Business Platinum card review: A huge bonus and top-notch benefits worth far more than the annual fee
This is one of the biggest offers the card has ever had, and once you’ve completed the minimum spending requirement, you’ll have at least 100,000 American Express Membership Rewards points (from the 85,000-point bonus and at least 15,000 points from spending) — worth $1,000 in travel booked through Amex.
Although The Business Platinum Card® from American Express comes with a $595 annual fee (See Rates), it’s also stacked with lucrative perks like complimentary airport lounge access and travel insurance. On top of that, if you’ve got a bigger tax bill, you can also earn 1.5x points on eligible purchases of $5,000 or more (up to 1 million additional points per calendar year).
If you prefer Chase Ultimate Rewards, which is another high-value, flexible travel rewards program, you might want to aim for the Ink Business Preferred® Credit Card. It’s currently offering 100,000 points after spending $15,000 on purchases in the first 3 months from account opening, and because the card offers a 25% bonus on travel redemptions booked through Chase, those 100,000 points are worth a whopping $1,250 in flights, hotels, car rentals, and more.
Chase Ink Business Preferred card review: One of the best credit cards for small-business owners, with a sign-up bonus worth at least $1,250 in travel
This card has a much lower annual fee of $95, and although it doesn’t offer the same long list of perks as Amex Business Platinum, you will earn 3x points on travel, shipping, internet, cable, phone, and advertising purchases (on up to $150,000 per year, then 1x).
There are also plenty of generous offers on personal credit cards available right now, and those tend to have lower minimum spending requirements. Whichever card you choose, make sure to pay off your credit card bill right away. If you end up in debt, the hefty interest fees you’ll pay will outweigh any rewards you earn.
For rates and fees of the American Express® Business Gold Card, please click here.
For rates and fees of The Business Platinum Card® from American Express, please click here.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.
Please note: While the offers mentioned above are accurate at the time of publication, they’re subject to change at any time and may have changed, or may no longer be available.