Paying your tax bill with prepaid cards
You have options to avoid hefty tax-payment card fees
Tony Mecia is a business journalist who writes for a number of trade and general-interest publications. He writes "Cashing In," a weekly column about credit card rewards programs, for CreditCards.com
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meet a minimum spending requirement on a new credit card, I've been using it to
buy Vanilla Reload prepaid cards, loading them to a Bluebird card, then using
Bluebird's bill pay feature to pay my rent and other expenses. With taxes due
later this month, is there a way to pay my tax bill with Bluebird, too? -- Jamie
become a popular technique for increasing your reward points or meeting
minimum-spend requirements on new cards.
It allows you to use credit-card spending for bills that don't typically accept
credit cards, such as rent, mortgages and other expenses. For instance, if you find
a store that will sell you a $500 Vanilla Reload card on a credit card, you can
then transfer that amount to a Bluebird account and pay bills that way, just as
you would with a bill pay feature on a checking account. Bluebird is an
American Express product.
limits on how much you can transfer, and there are small fees, but you can
understand why this has become a popular sport: It's a way to shift more
spending onto credit cards and reap greater rewards.
has become so popular, in fact, that major retailers have started putting an
end to it, after concerns about fraud. CVS has confirmed reports that surfaced last week that it has stopped selling Vanilla Reloads to customers using credit cards. "As part of a regular review of our policies and procedures, we have made a business decision to require any purchase of a reloadable debit card to be made using cash only," wrote CVS Director of Public Relations Mike DeAngelis in an email. "This applies to all reloadable debit cards, regardless of the brand."
Office Depot made a similar move in 2012. It is becoming tougher to find stores that
allow you to buy the cards with a credit card.
But to answer
your question, Jamie, yes, you can use Bluebird to pay your tax bill, which can
save you money compared to paying with a credit card. The Internal Revenue Service's payment processors typically charge 2 percent to 3
percent for using credit cards, versus a flat rate of around $3 for using a
You can avoid
that fee altogether if you use a Bluebird preauthorized check. You have to fill
out a form online that includes information about the payee and the amount
you're paying, to ensure the money is in your account. Then you write an
authorization number on the check and send it to the IRS as you would any other
personal check. Be aware that if you're writing a check to the IRS and are
asked to provide an IRS address, you must write the post office box without
periods (as "PO Box") -- otherwise Bluebird will not process the form. An
American Express spokeswoman told me the company is aware of that glitch and is
working on fixing it.
retailers pulling the plug on purchases of Vanilla Reloads with credit cards,
it looks like this technique for building rewards faces an uncertain future. If you read the travel-reward blogs out there, you'll see that
there are plenty more creative techniques to increase credit-card spending
involving money orders, online payment companies and prepaid gift cards. But
they might not be as easy or inexpensive as the credit card-Vanilla
See related: Multiply reward points with prepaid and reload cards
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Published: April 8, 2014
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