Politics & Government

In SC, when taxpayers pay by credit card, it costs everyone else

Heap of dollars, money background Getty Images | Royalty Free
Heap of dollars, money background Getty Images | Royalty Free Getty Images/iStockphoto

With tax season heating up, some S.C. taxpayers are paying by card. And it’s costing the rest of the state.

Last year, the state paid $22 million in credit card fees to process tax payments, the S.C. Department of Revenue told The State. That’s money that could instead go toward funding public education, road repair projects or raises for underpaid state employees.

For the taxpayer, paying with a card can be a good deal. You can get perks — such as credit card points — and the state picks up the card processing fees.

State tax officials say they negotiated the lowest possible fee rates with their payment processing vendor.

But tax agencies in other states avoid the issue altogether by making card payers pay their own fees. The IRS also charges fees from cardpayers filing their taxes, usually at a 2 percent markup, according to the consumer education outfit Credit Card Insider.

That’s why Credit Card Insider recommends you don’t use a card while paying your federal taxes. “If you’re looking at a $2,500 tax bill, you’ll pay almost $50 extra just for the privilege of using your credit card,” writes blogger Susan Shain.

Taxpayers may also owe interest on their cards, and the rewards offered aren’t that great. Cash back rewards cards generally top out at 2 percent for non-category purchases like taxes, Shain writes.

South Carolina received nearly $871 million in tax payments via 219,311 credit card transactions last year. That’s about $4,000 per payment.

Revenue officials stressed the number of transactions doesn’t equate with the number of taxpayers using the credit option. Some may have charged multiple payments to their cards.

Jennifer McDermott, head of communications and consumer advocate at savings website Finder.com, told U.S. News taxpayers may opt to pay credit for a number of reasons.

“This might be due to a lack of available funds at the time they are owed, with IRS late fees outweighing the credit card interest they would have to pay,” she says. “Or they might be part of the one in three Americans who use their credit card as a payment method purely for the points.”

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Bristow Marchant is currently split between covering Richland County and the 2020 presidential race. He has more than 10 years’ experience covering South Carolina. He won the S.C. Press Association’s 2015 award for Best Series on a toxic Chester County landfill fire, and was part of The State’s award-winning 2016 election coverage.