Recently American Express announced members can now pay their taxes with the points they have earned through the Amex Membership Rewards Program. American Express offers a point-based rewards system called “Membership Rewards” to those who qualify for and use their charge card. American Express now has the option for its cardmembers to use their membership rewards points to pay their federal and even some state taxes. This concept sounds great, but is it practical? This article gives you a look at the details so you can decide its worth saving those points or paying your taxes with them instead.
There are two stipulations in order to use the Membership Rewards points to pay your taxes. First you must have already filed your taxes and second you must use chose one of the following services to pay your taxes: Pay1040.com or OfficialPayments.com. Both of these services offer an electronic payment solution to help you pay your overdue taxes once they have been filed. The sites accept payment by either check or debit/credit card. There is a convenience fee of 2.35% of the payment amount to process your federal tax payments. In addition there is a $3.95 flat fee for processing payment with debit cards.
Typically American Express gives its cardholders one rewards point for every dollar they spend on the card. Occasionally there are special opportunities which allow members to earn double or triple points. Usually the card holder has the option to cash points in for in for airline miles, dining cards or items from the online store. Now American Express is allowing members to take these points and apply it to their unpaid taxes.
If you decide to use your points to pay your taxes be sure to consider the reward exchange rate and decide if it is worth while. Paying $1 to the IRS actually requires 200 Membership Rewards Points. This isn’t the same rate cardmembers are use too and isn’t exactly a favorable exchange rate. At this rate you would need to spend a minimum of about $400,000 on your card in order to use those points to pay off a $2,000 bill from the IRS or $1 million to pay off $5,000 in taxes, not to mention the processing fee.
Most members probably do not have this many unused points so that leads us to the question: Is it even possible to get than many points? American Express doesn’t release this type of information about its card members, but Amex does claim they have card members who have millions of points. Apparently its possible, after one man reportedly racked up more than 20 million Amex points.