Is It Worth Paying Your Property Taxes by Credit Card?Posted July 3, 2014 in Credit Card Tips, Personal Finance
While Calgary may be shunning credit cards, Winnipeg is embracing them – at least partially. Although homeowners won’t be able to pay their property taxes directly to the City of Winnipeg by credit card, they can now use Plastiq, a third party service provider, to pay by credit card. This is similar to the service offered by Canada Revenue Agency to taxpayers, allowing them to pay their balance owing by credit card.
Using Plastiq is easy – simply visit the website, sign up, enter your account information and you’re finished! Using your credit card to pay your property taxes can earn you a lot of reward points, but there’s a catch – the credit cardholder (you) are stuck paying the fees. Let’s look at the pros and cons of paying your property taxes by credit card.
Advantages of Paying Your Property Taxes by Credit Card
Reward Points: The main reason to pay your property taxes by credit card is the reward points. For many homeowners their annual tax bill can be quite hefty, so what better way than to reap some rewards than with your credit card? For example, if you owed an annual property tax bill of $3,000, you’d earn $30 by using your 1 per cent cashback credit card. You’d earn even more rewards with premium credit cards that often offer 2 per cent or more.
Grace Period: Coming up with the funds for your annual tax bill all at once can be tough, especially when you’re budgeting for a summer getaway. If your cash flow is tight, your credit card can be your saving grace by buying you some time. The majority of credit cards come with a 21-day interest-free grace period at the end of your statement date. If you’re certain you can come up with the funds before your statement comes due, paying your property taxes by credit card makes sense. Just make sure you avoid carrying a balance at all cost!
Disadvantages of Paying Your Property Taxes by Credit Card
Fees: When you make a purchase using Plastiq, it’s slightly different than a standard credit card transaction. With a typical credit card transaction, the merchant pays a fee of between 1.5 and 3 per cent to cover the costs associated with offering credit cards as a method of payment. So-called premium credit cards offer the greatest rewards, but also come with the highest merchant fees.
With Plastiq the merchant fees are reversed – instead of the merchant (the City of Winnipeg) covering the fees, homeowners are left footing the bill. To see if it’s worth using your credit card to pay your property taxes, you’ll have to determine if the reward points outweigh the fees. For example, if you have a tax bill of $3,000, and you must pay 3 per cent in fees, you’ll end up with a final tax bill of $3,090. If you don’t earn at least $90 in rewards to cover the fees, it’s not worth using your credit card.
Interest: Credit cards are a great way to manage your cash flow and earn rewards points, as long as you use them responsibly. Responsible credit card spending means living within your means and paying off your entire credit card balance when it comes due. If you’re short on cash and you have a large property tax bill owing, your credit card is only a short-term fix. Although it’s nice to earn reward points, they will be offset by the hefty interest charges of 19 per cent or higher you’ll incur by carrying a balance.
To manage your cash flow better, instead of paying your annual tax bill all at once, you can sign up for Tax Instalment Payment Plan (TIPP) and arrange to pay your annual tax bill by way of equal monthly payments.
The Bottom Line
It’s nice to see the City of Winnipeg become one of the first cities to offer credit card as a method of payment for property taxes. Before choosing to pay by credit card, it’s important to see if the rewards you’ll earn are better than the fees you’ll pay for using Plastiq. If not, there are plenty of other ways to pay your tax bill, including online banking, ePost, mail and in person.
For more information on paying your property taxes by credit card, please visit Payment Options – Assessment and Taxation Department – City of Winnipeg.