It can be painful to hand over a hefty chunk of money when property taxes come due, but paying taxes with a credit card won鈥檛 do much to ease the pain. Responding to requests from residents, Langford council has agreed to implement an arrangement whereby taxes can be paid with credit cards. The reasons, officials say, include convenience, an opportunity to collect points or travel miles and the ability to make monthly payments.
Credit-card companies levy a three per cent service charge on each transaction, which is included in the price of most goods and services. However, municipalities are not allowed to charge that fee and cannot pay it out of tax revenues. So Langford has made arrangements with a third party called Paymentus to which residents can pay the full tax amount, plus the service charge. Paymentus will retain the service fee for itself and deposit the full tax amount into the city鈥檚 bank account.
Three per cent is a high price to pay for convenience 鈥� it will amount to more than $60 on the average Langford residential tax bill. That is many times more than the cost of cheques and postage stamps, or even the gas to drive to city hall to pay the bill in person.
Those looking to collect points need to check the math 鈥� the service charge easily wipes out the value of any points, travel miles or cash-back payments that might be involved.
And that鈥檚 assuming the person paying the bill plans to pay off the credit card within a month, before interest accrues.
Those wanting to ease the pain by spreading out the payments will incur interest that typically ranges from nine to 20 per cent. Even if the amount is paid off after three months, add $50 to $100 to the tax bill.
It鈥檚 not a bad idea to pay property taxes in instalments, and most municipalities allow that method. The catch is that the taxes must be paid ahead of time, not after the fact, so your last payment is made about the time the tax bill comes due. The good news is that interest is paid on prepayments received up to a certain time. That interest rate is set by the province and, according to Langford鈥檚 website, is generally higher than the interest paid on savings accounts.
A taxpayer reluctant to hand money over to a government before it鈥檚 absolutely necessary can still use the instalment plan by setting up his or her own savings account, into which monthly payments are deposited automatically.
If the taxpayer鈥檚 cash crunch is short-term, then perhaps there鈥檚 some merit to using a credit card to pay the taxes, then paying off the card balance when the crisis has passed. But a line of credit or short-term bank loan might be a less-costly option.
Most people won鈥檛 use plastic to pay taxes. Maple Ridge began allowing credit-card payments last year, and only 300 out of 30,000 tax bills were paid through that method.
If it鈥檚 a choice some taxpayers want to make, it might not be right for municipal councillors to deny the opportunity. But using a credit card to pay taxes isn鈥檛 a sound financial practice, and municipalities should not be eager to rush into the arrangement.
