|
||||||||||
Listen up Amex rewards cardholders. American Express wants to pay your taxes for you. Sounds too good to be true? Well, it is—and isn’t.
Amex recently announced that its rewards card cardholders can now use accrued points to cover not only the convenience and payment fees associated with filing taxes online, but even the actual tax payment due as well. Under the new program, credit card reward points can be applied towards Amex cardholders’ federal, state, and even local tax payments for transactions processed through websites Pay1040.com and OfficialPayments.com.
As the old saying goes, however, if it sounds too good to be true, it probably is. American Express rewards cardholders pay a hefty premium for the pleasure: for each tax dollar paid with rewards card points, cardholders will have to pony up 200 points. In contrast, in most rewards programs, the standard rewards credit card rebate rate is 1 cent per point, or 100 points per dollar reward payments.
In other words, card members who pay their taxes with rewards earnings will see the value of their rewards cut in half compared to those who use points for airline tickets or other rewards, including taking out simple cash back. For example, a tax payment of $100 would require 20,000 points—almost enough for an airline ticket under most rewards rebate programs, and enough for a $200 cash back under cash back credit card programs. In short, consumers would be better off signing up for a cash back credit card and putting earnings towards taxes, as opposed to trying to pay off their taxes with rewards points.
Aside from chipping away at taxes, American Express rewards offer cardholders a variety of other redemption options. Beginning at 1,000 points, rewards can be used to pay for products and services including airfare, hotel stays, and other travel purchases. Points can also be cashed in for dining and entertainment rewards, as well as a variety of products ranging from Apple iPods to vintage wine.
However, rewards cardholders will want to browse available rewards carefully: while some purchases, such as gift cards, can be made at the optimal 100 points per dollar ratio, others come at steeper prices, up to the same 200 points per dollar that tax payments go for. The keen shopper can find many of the best deals under the “Specials” section, which features a variety of offers ranging from 15 percent off gift card collections to 40 percent off luxury hotel and resort stays.
