Rewards Programs

Taxes, tuition can rack up rewards, for a fee


Large payments for taxes or tuition can rack up big rewards, but they often come with extra costs — ‘convenience fees.’ When does it make sense to pay them?

The content on this page is accurate as of the posting date; however, some of our partner offers may have expired. Please review our list of best credit cards, or use our CardMatch™ tool to find cards matched to your needs.

If you love piling up points on your rewards credit card, the prospect of paying college tuition, taxes and other big expenses with your card can be awfully tempting. But as you may have already discovered, you will probably have to pay an extra “convenience fee” to use your credit card.

As a rule of thumb, the fees often negate the value of any miles earned as well as cash back rewards, say experts.

Paying tuition, taxes credit card

Let’s assume you earn 1 mile for every dollar you spend on your rewards card, but every dollar spent comes with a 1.89 percent convenience fee (also called a transaction fee). And let’s say you amassed 60,000 miles and spent them to fly economy to Europe. You’ll be paying $1,134 (60,000 x .0189), which is no bargain, says Brian Kelly, founder of “You could probably pay $700 or $800 for that same trip and you’d also earn miles,” he notes.

There are two scenarios, however, when it might make sense to pay a fee to use plastic, Kelly and other rewards experts say:

1. To qualify for an introductory offer.

If you’ve signed up for a rewards credit card that requires you to spend a certain amount in a short time frame to get a big bonus, paying a fee may be worth it, says Rick Ingersoll, who has written about credit card rewards at

The Chase Sapphire Preferred Card*,  for example, gives you 50,000 bonus points after you spend $4,000 in the first three months. Even if you pay a 2 percent fee to reach the requirement, that sign-up bonus could be used to pay for at least one round-trip ticket for your next vacation.

“It’s all about what they are going to charge you and what are you are going to get in return,” Ingersoll says. “If paying your taxes or tuition with your card is the only way you’re going to qualify for a big bonus, do it.”

2. To hit a specific elite status.

If you’re trying to reach elite status at a hotel chain or airline by spending a certain amount in a year on your hotel- or airline-affiliated credit card, the benefits you’ll get may be worth more to you than the amount of the fee, notes Gary Leff, who blogs about his miles and points obsession at View From the Wing..

“A higher status will often qualify you for hotel upgrades, free breakfast, free internet and club lounge access for a year,” he explains. “If you travel enough, it will pay for itself.”

If you decide that paying a fee makes sense for you based on the benefits you’ll get, here’s what you need to know about each of the options:

  • Paying tuition: According to preliminary data from the 2013 Student Financial Services Policies and Procedures Study conducted by the National Association of College and University Business Officers, approximately 56 percent of higher education institutions accept credit card payments without charging a convenience fee. However, for the remaining 44 percent that do, the fees will either be a flat rate or percent of your bill. Policies vary, so look for details on each school’s website payment portal.
  • Paying taxes: The IRS offers four options for paying federal taxes via plastic. has the lowest fee, 1.87 percent, and accepts MasterCard, Visa and Discover cards. You can use your American Express, but you’ll pay a 2.29 percent fee. Many municipalities also allow you to pay your property taxes via credit card — with a fee. surveyed five major U.S. cities — New York City, Boston, Philadelphia, Columbus and Charlotte — and found that convenience fee charges for paying property taxes with a credit card are typically between 2 to 3 percent of your total tax payment. Rates vary, so check your local taxing authority.
  • Paying your mortgage: Mortgage servicers typically don’t allow borrowers to make direct payments using a credit card, but some have made agreements with third party vendors — such as — that will take your credit card details and pay your mortgage for a flat fee plus a percentage of your payment. The fees for this service vary based on the amount of your mortgage and your mortgage company, but are typically between 1.5 and 3.5 percent of your payment.
  • Paying your rent: Landlords are increasingly offering tenants the option of paying rent with a credit card. Convenience fees for such transactions are typically around 2.75 percent of your bill, but in this case rewards may outweigh costs. Some third-party payment facilitators that landlords are using to process the card payments are rewarding tenants for using their card payment services by offering discounts to local businesses and services.

As long as you’re looking for ways to rack up points, don’t forget that there are other big payments you can make without paying a fee. You could prepay for a funeral, pay for your next home improvement project (or just the materials) or even pay for part of a car purchase.

“A lot of car dealers will tell you they can’t put it on a credit card, but without a doubt, they can do it if they want,” Kelly says. “I recommend first agreeing on the price you want to pay, and then telling them you want to put $5,000 of it on a credit card. You say, ‘Look we came to a price, I’m willing to pay, run it now or I’m walking. I’ve done it and have been able to put $12,000 of a car purchase on a credit card.”

Of course, charging large purchases should only be an option if you have the means to pay the credit card bill when it comes due. Allowing interest to accrue by rolling over a balance, along with paying any transaction or “convenience” fees will most certainly negate the value of any rewards that you can amass.

The content on this page is accurate as of the posting date. Please see the bank’s website for the most current version of the offer.

See related:Pros and cons of paying taxes with a credit card, Convenience fees: When is it OK to charge extra to accept credit cards?

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

What’s up next?

In Rewards Programs

Credit card bonuses playing hard to get

Credit card sign-up gift bonuses, once dangled freely, are becoming harder to qualify for as issuers set up hurdles designed to discourage hit-and-run customers

See more stories
Credit Card Rate Report
Cash Back

Questions or comments?

Contact us

Editorial corrections policies

Learn more