If you're trying to accumulate credit card rewards, paying your...

If you're trying to accumulate credit card rewards, paying your tax bill with plastic could make sense. Credit: Getty Images/iStockphoto/stocknshares

Before you know it, a big tax bill might be staring you in the face. If you have the cash to pay it, no sweat. But what if you don’t?

One option is to pay by credit card. Is that a good idea, though? Experts say it depends.

When to whip out the plastic

If racking up rewards points is your objective, paying with your rewards credit card may be a smart move, said Ted Rossman, industry analyst with CreditCards.com. Know that the IRS has approved three credit card processors, and they will charge a minimum convenience fee of almost 2 percent. That could wipe out the value of any rewards you earn. This doesn’t mean you have to nix the notion. Rossman said that if you use the tax payment to earn a lucrative sign-up bonus, that benefit could outweigh the IRS fee. Just make sure to pay off the credit card balance as soon as possible.

Come up with Plan B

And if you don’t have a rewards card, should you still charge that tax bill?

“Paying taxes with a credit card is generally never a good idea; it’s expensive and merely transfers tax debt to a high-interest, revolving credit account,” said Ben Woolsey, a credit card expert with Creditsoup.com.

You do have options if you take your plastic out of the mix. Beverly Harzog, a consumer finance analyst with U.S. News & World Report, points to the IRS, which offers various installment loans, including one where you pay in full within 120 days and pay no fees. “If you need years to pay it off, the IRS has plans for that, too, with fees though,” she said.

Don’t rule out LendingClub, an online lending service, for a personal loan. Said Harzog, “Compare the costs with the IRS option. LendingClub offers excellent rates if you have great credit.”

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