Bad Credit Finance

We’re coming up on tax time again, my most favorite time of the year – after my bi-yearly dental check-up and renewing my car’s registration at the DMV, of course.

I’ve been reading more than a few finance blogs (including tips from the IRS itself) that suggest consumers use their credit cards as a safe and convenient way of paying their taxes.  Well, it might be convenient, it’s not the best way to pay for your taxes especially if you’re working to repair your credit and here’s why:

You’re charged a fee for the “convenience”

Every time you make a tax payment with your credit card, you aren’t actually paying the IRS directly – you’re paying a third party service.  These service providers all charge a “convenience fee” for using their services, typically ranging anywhere from just under 2% to almost 4% of the amount you owe.

So, say you owe around $1500 in taxes, and you go with the service provider that charges 3.93% in interest.  For using your credit card to make the payments, you could end up being charged an extra $59 that you wouldn’t have to pay had you not broken out your card for a charge.

Your card providers don’t like it

Paying for your taxes with your credit card makes you look desperate and hard-up for cash to your credit card providers, which can make you look like more of a credit risk – something you DON’T want to happen.

Paying a large tax bill exclusively with your credit card will decrease your overall utilization ratio, which can lead to a lowered credit score, leaving to worry about credit repair on top of everything else.

This makes you look desperate to your card providers, who may just decide to give your account another look, possibly even going so far as to decrease your limit and increase your interest rates.

You could be charged more in interest

If you just charged a large tax bill to your credit card, you’ve created a ticking time bomb that could blow up in your face if you don’t pay it off in time.

If the card you used to charge your taxes to already has a high APR rate, not only will you have to worry about the added convenience fee, you’ll also be paying interest on the bill if you don’t pay it off in time.

Your card’s Rewards aren’t worth it

“But, my card’s got some pretty sweet Rewards deals; they’ll make it all worth it, right?” I hear you ask.

Wrong.

Even assuming your card has a worthwhile rewards offer, like 2% cash back on all purchases, it won’t be enough to make up for the amount of money you’ve already put down on your taxes.

Simply put, if you’re paying your taxes with credit cards for the rewards, you’re doing it wrong.

The bottom line is…

If you’ve got a large tax bill that needs to be taken care of, don’t put it all on your credit card, if you can; it’ll only add to your worries.

When I was a kid, I was standing in the grocery store check-out line with my Dad when the lady in front of us pulled out a pile of coupons and started handing them to the checker. My dad whispered something to me about having to wait, referring to the woman as a “penny pincher.” It was a harsh label for someone just trying to save money on groceries. But in some cases there is a stigma attached to people dedicated to saving more and spending less–especially those who save at the expense of others or who are afraid to spend money on anything. Here are things that I think define frugal living:

1. Saving is a means to an end. The end could be a trip to France, a $10k emergency fund that will bring you peace of mind, paying off the $3k credit card debt that has been weighing on you, a down-payment on a condo or all of the above. 2. It’s

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I’m sure there are more than a few people who will read that title and ask themselves how many times they’ve wondered the same thing to themselves.  We’ve talked to a number of consumers who definitely regret signing on the dotted line, and have even posted in the past that co-signing a loan for ANYBODY could turn out less than pleasant for you, and leave you needing credit repair services before you know it.

A quick rundown on what co-signing a loan actually means, for the lucky few who are scratching their heads at this post: Co-signing a loan basically makes you just as responsible for repaying it as the party actually taking the loan out in the first place.  For many consumers, that seems feasible.  After all, the only people asking you to co-sign a loan are either family members or close friends; you’re not gonna co-sign a loan for any regular Joe.

But, as is often the case, stuff happens and your friend or family member can’t afford to pay the loan off, leaving you holding the bill all by yourself.  So how do you get out of it?

How to remove yourself from a co-signed loan

As a wise Homer once said to his wife Marge, “Weaseling out of things is important to learn. Its what separa

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