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Paying taxes sucks, though somehow it sucks slightly less when you can earn some points for paying them, even at a cost. In January Gary outlined how to pay taxes using a Suntrust Delta SkyMiles debit card for a flat fee of $3.49, which is a ridiculously good deal. No matter how big your tax bill is, you can pick up one SkyMile per dollar spent, and pay a flat fee of $3.49.
But if you don’t have a Delta SkyMiles debit card there are at least some other ways to rack up miles. For example, ChoicePay will let you pay your taxes by credit card for a fee of 1.88%, while payUSAtax will let you pay your taxes by credit card for a fee of 1.89%.
I’ve been asked by several readers under which circumstances it can make sense to essentially “buy” credit card spend at a fee of 1.88%, so I figured I’d share my thoughts. Please keep in mind that some of the below strategies involving thresholds only apply to those that owe a lot in taxes, though I’ll share them anyway since I think it’s threshold bonuses that can make this worthwhile.
Starpoints are the single most valuable points currency, in my opinion, and I value them at about 2.2 cents each. Since Starpoints convert to airline miles at a 1:1 ratio with a 5,000 point bonus for every 20,000 points transferred, this is also a way of picking up miles in a variety of programs for ~1.5 cents each. I’d say that’s a bargain.
For that matter Starpoints are one of the best currencies for booking Emirates awards, given that they partner with Japan Airlines. Between New York and Dubai, for example, they charge just 85,000 miles in business class or 135,000 miles in first class. At 1.5 cents per Japan Airlines mile, that’s a steal.
On one hand I have a really hard time suggesting anyone rack up Hilton points after the devaluation a couple of weeks ago, though there are two circumstances under which I think it can make sense to pay with the Hilton Reserve card. First of all I should say that I value their points at 0.4 cents each, and you earn three points per dollar spent on “base” spend.
That means $10,000 of spend on the card will get you 30,000 HHonors points, but the bonus is that you get a free weekend night certificate valid at almost all properties. So if you’re paying $188 in fees and getting $120 “worth” of points, then you’re basically paying $68 for a weekend night certificate valid at some really nice properties.
Similarly, if you can get $40,000 of spend on the card you’d be looking at about $752 in fees. That would get you 120,000 points (worth $480 to me), so for $272 you’d be picking up a free weekend night certificate and top tier Diamond status in the HHonors program. Or to do the marginal analysis on that above $10,000 of spend, you’re looking at spending $204 for Diamond status. I mean, you can’t go that wrong with that, can you?
As I wrote about last week, the Barclaycard Arrival Plus™ World Elite MasterCard® basically offers 2.1% cash back towards travel. So if you’re paying a fee of 1.88%, you’re looking at a “gain” of 0.34% per dollar spent. Now, the catch of course is that you’re converting cash into “travel cash.” Whether or not that’s worth it to you depends on your situation, though I know in some cases it can make sense.
I ultimately made the decision to dump the British Airways Visa last year. However, the main benefit of having the card is a companion certificate valid for travel on British Airways when you spend $30,000 on the card in an annual year. So if you have a huge tax bill and value the companion certificate, the card can make sense. I value British Airways Avios at 1.3 cents each, and you earn 1.25 Avios per dollar spent on the card, meaning by my valuation you’re getting a “return” of 1.625% on the card. So on $30,000 of spend that means you’d basically be paying a “premium” of 0.255% for the option of earning the companion certificate, which comes out to $76.50. If only British Airways’ fuel surcharges were that low. 😉
While it’s not something I’d personally take advantage of, Marriott offers one elite night credit for every $3,000 spent. I value Marriott Rewards points at 0.8 cents each, so on the surface you’re only getting a “return” of 0.8 cents, while you’re paying 1.88 cents per point. But basically you can pick up elite night credits at $32.40 each by that valuation. That’s a mattress runner’s wet dream. Now, I’m not a huge fan of the Marriott Rewards program to begin with, though if you’re a bit short on status that could be a good path to take.
If you spend $40,000 on the Hyatt Visa card annually you earn five stay credits and ten night credits towards elite status. I conservatively value Hyatt points at 1.6 cents each. So over $40,000 worth of spend you’d be paying $112 more than the value of points for those five stay credits and ten night credits towards status. Given that Hyatt is otherwise pretty strict about requalifying for status, in many circumstances I’d say that’s a great deal.
While there are some other cards out there where it can make sense to essentially rack up spend at a fee of 1.88%, I think the above are some of the best options. Did you pay your taxes by credit card, and if so, which did you end up using?