Credit cards are great, but not all earning opportunities are a good idea

Today, I filed my taxes. Yeah! Since we owed, for a few minutes, I contemplated how I was going to pay THE MAN. Check, direct debit, credit cards and debit cards payments were all accepted. The thinking in my goes like this – “can I get something back or otherwise benefit in some way if I am buying / paying for something?” A few options here. I could file immediately and pay with the benefit of knowing it was done and no risk of missing the deadline and assessed penalties. Or, I could file and pay later and potentially take advantage of the “float” of interest. Or, I could pay with a credit card, get some points, but pay an outrageous processing fee.

Credit cards are tempting…but not always a great idea for all purchases

credit cards

Readers of this blog know that I love collecting loyalty points and cash back whenever I can. But, I am glad I didn’t get seduced by the dark side of credit cards this time around. It wasn’t going to happen but since payment processing should theoretically only have come down in actual transaction cost over the years, I didn’t think the fees to pay taxes would still be north of 2 – 2.5% like they were advertised. Points typically aren’t worth that much in most cases. And, there’s a risk that you don’t even earn points at all if the credit card issuer doesn’t code this transaction as a “purchase.” In the end, I opted for the direct debit option.

Payment processing for credit cards is understandably a much needed business. But, I think it’s a little expensive at the moment and ripe for further disruption. The larger point here is to be careful when using a credit card or even debit card to make a purchase – both can be assessed significant processing fees, thus wiping out significant benefits for this payment convenience. Gas stations are notorious for this practice, but one can recoup that with the right loyalty credit card.

It’s a payment jungle out there.


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