Two new reports show that the number of consumers who plan to pay Federal income taxes with a credit card will increase significantly this year. One study showed an increased from 1% to 5%, while the other study showed a jump from 3% to 11% in the number of Americans who plan to use their credit cards to pay their tax bill this year.
A study from Ipsos-Insight revealed that 62% of adult Americans are aware they can pay taxes by credit card. The research says the convenience charge levied for using a credit card is clearly the barrier to broader use of this service. According to the study, Americans are extremely resistant to paying the convenience fees. Three out of four say they “definitely will not” use a credit card the next time they owe incremental Federal income taxes, down slightly from last year. Instead, they will resort to the usual personal check (70%), money order (3%) or direct debit from a bank account (15%). The study reveals that if the service were free, 21% of those open to the concept would use it, down from 34% last year. The “Taxpayer Relief Act of 1997” authorized the Treasury to accept credit card payments for federal taxes but prohibits the IRS from paying a merchant fee.
A survey by the “Cambridge Consumer Credit Index” found that 11% of Americans plan to use their credit cards to pay their tax bill this year, up from only 3% who used credit cards in 2004. The Cambridge survey also found that 31%, up from 27% in 2004, plan to save their tax refunds in a bank account or invest the money in stocks, bonds or mutual funds.