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Should you pay the CRA with your credit card?
A sign outside the Canada Revenue Agency is seen Monday May 10, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Christopher Liew
Contributor
Follow | Contact
Updated June 20, 2023 7:29 p.m. IST
Published June 20, 2023 7:20 p.m. IST
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Are you debating whether you should pay your taxes off with a credit card? This year, more than 6.5 million Canadians owe taxes, with an average balance of $6,990, according to the CRA’s 2023 personal income tax return statistics .
Paying your taxes off with a credit card could work to your benefit. However, there are also some considerable drawbacks to take into account. Below, I’ll discuss some of the pros and cons of paying the CRA with your credit card and outline some of the best alternatives.
HOW TO PAY THE CRA
ADVERTISEMENT
Thankfully, the Canada Revenue Agency makes it incredibly easy for taxpayers to pay their debts. After all, the CRA wants to get paid.
RELATED STORIES
The pros and cons of sharing your salary with coworkers
Should you take advantage of the First Home Savings Account?
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RELATED LINKS
Set an alert for more of these columns using these keywords: Christopher Liew and CTV News
For reference, here’s a comprehensive list of how individuals can pay taxes to the CRA .
Online
Third-party card processors (credit or debit card, PayPal, or Interac e-Transfer)
Your online banking portal
Pre-authorized debit (PAD) via your online banking portal
CRA My Payment via Interac (debit card only)
Wire transfer (if you don’t reside in Canada or don’t have a Canadian bank account)
In-person
Canada Post (debit or cash only)
Your bank or financial institution (debit or cheque only)
By mail
Cheque or money order (must have a remittance voucher )
ADVANTAGES OF PAYING WITH YOUR CREDIT CARD
The easiest way to pay your taxes online is through the CRA My Payment system, which can be accessed through your CRA My Account or by paying through your bank account’s online portal.
However, the CRA has also partnered with PaySimply - a third-party online payment processor that accepts payments made through PayPal, debit, or credit cards.
As I mentioned, there are pros and cons to paying your taxes with a credit card. Let’s start with the advantages.
Instant payment
One of the most common reasons why taxpayers pay online with their credit cards is that the payment is processed instantly. If you’re running short on time, are having trouble logging into your CRA My Account, or are approaching your payment deadline, paying with your card online ensures your payment is processed quickly.
You can pay your taxes on time
If you’re one of the many Canadians experiencing financial hardship , you may not have cash available to pay your tax debt. While the CRA offers payment plans (more on this below), these may also result in added interest fees.
Paying your taxes off with one lump-sum credit card payment ensures your tax debt is handled on time so you can avoid any unpleasant interactions with the CRA.
Earn points and rewards
Even if you have the funds available to pay your tax debt, you may still benefit from paying your taxes with a credit card if you have a card that allows you to earn cashback or additional rewards.
For example, many cards offer new cardholder bonuses that award users travel rewards points, free credit, or additional cashback if they meet certain spending requirements within an allotted timeframe.
Paying off your taxes can be a great way to meet these spending requirements and cash in on your reward.
However, you should also weigh the online card processing fees against these rewards to see if it’s worth using your card.
DISADVANTAGES OF PAYING WITH YOUR CREDIT CARD
Paying your taxes off with your card may be beneficial. However, there are also some drawbacks you should be aware of before you make the decision.
Credit card interest
Credit cards are notorious for having high-interest rates, which is typically far higher than the interest imposed by the CRA on late taxes.
If you don’t plan to quickly pay your credit card balance off after using it for your taxes, you could end up in even more debt than you started with.
Costly processing fees
PaySimply, the CRAs third-party card processing partner, imposes a 2.5 per cent fee on all PayPal and credit card transactions. This means you’ll pay an extra $2.50 for every $100 you owe and $25 for every $1,000 you owe.
By comparison, bank account transfers are often fee-free and payments made via Canada Post have a flat fee that ranges between $3.95 and $7.95.
Impact on your credit score
If you don’t pay your credit card balance off before the end of the month, it could significantly impact your credit score. One of the key factors that determines your score is your credit utilization .
This measures the percentage of your total available credit that you’ve used and is calculated by credit bureaus monthly. Your credit score could be negatively impacted if your credit usage increases significantly due to a large lump sum tax payment.
ALTERNATIVES TO PAYING WITH YOUR CREDIT CARD
Here are a few alternatives to consider instead of paying your taxes off with your credit card.
Set up a payment plan
The CRA allows taxpayers to set up individual payment plans based on their income and expenses. Once a payment plan is created, the amount will be withdrawn monthly via a pre-authorized debit through your bank. If you go this route though, be aware that there might be interest payments that you’ll need to pay . It generally won’t affect your credit score if you decide to set up a payment plan.
Obtain a personal loan
Requesting a personal loan through your bank may be better than using your credit card. Personal loans often have lower interest rates than credit cards and may offer more favourable payment terms.
Making timely payments either in a lump sum or in separate amounts could also improve your credit history and help diversify your lines of credit, which could positively impact your credit score.
Reassess your tax returns with a professional
If you filed your taxes yourself, then there’s a chance that you may have made a few mistakes.
A CPA could help you identify tax credits and benefits you didn’t apply for, which could significantly lower your tax liability.
Tax debt relief and forgiveness
The CRA may offer tax debt relief and, in rare cases, forgiveness based on extenuating circumstances. However, nothing is guaranteed, and each case is reviewed in-depth before a decision is made. You must contact the CRA directly to discuss relief or forgiveness.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website .
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OPINION
Sho uld you pay the CRA with your credit card?
Are you debating whether you should pay your taxes off with a credit card ?Paying your taxes off with a credit card could work to your benefit. However, there are also some considerable drawbacks to take into account, says contributor Christopher Liew.
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Subscribe me for daily news updates
Should you pay the CRA with your credit card?
A sign outside the Canada Revenue Agency is seen Monday May 10, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Christopher Liew
Contributor
Follow | Contact
Updated June 20, 2023 7:29 p.m. IST
Published June 20, 2023 7:20 p.m. IST
Share
More share options
Are you debating whether you should pay your taxes off with a credit card? This year, more than 6.5 million Canadians owe taxes, with an average balance of $6,990, according to the CRA’s 2023 personal income tax return statistics .
Paying your taxes off with a credit card could work to your benefit. However, there are also some considerable drawbacks to take into account. Below, I’ll discuss some of the pros and cons of paying the CRA with your credit card and outline some of the best alternatives.
HOW TO PAY THE CRA
ADVERTISEMENT
Thankfully, the Canada Revenue Agency makes it incredibly easy for taxpayers to pay their debts. After all, the CRA wants to get paid.
RELATED STORIES
The pros and cons of sharing your salary with coworkers
Should you take advantage of the First Home Savings Account?
Find out how much contribution room is left in your RESP to avoid penalties
Is it a good time to buy a new vehicle?
How to get the most out of your grocery rebate
RELATED LINKS
Set an alert for more of these columns using these keywords: Christopher Liew and CTV News
For reference, here’s a comprehensive list of how individuals can pay taxes to the CRA .
Online
Third-party card processors (credit or debit card, PayPal, or Interac e-Transfer)
Your online banking portal
Pre-authorized debit (PAD) via your online banking portal
CRA My Payment via Interac (debit card only)
Wire transfer (if you don’t reside in Canada or don’t have a Canadian bank account)
In-person
Canada Post (debit or cash only)
Your bank or financial institution (debit or cheque only)
By mail
Cheque or money order (must have a remittance voucher )
ADVANTAGES OF PAYING WITH YOUR CREDIT CARD
The easiest way to pay your taxes online is through the CRA My Payment system, which can be accessed through your CRA My Account or by paying through your bank account’s online portal.
However, the CRA has also partnered with PaySimply - a third-party online payment processor that accepts payments made through PayPal, debit, or credit cards.
As I mentioned, there are pros and cons to paying your taxes with a credit card. Let’s start with the advantages.
Instant payment
One of the most common reasons why taxpayers pay online with their credit cards is that the payment is processed instantly. If you’re running short on time, are having trouble logging into your CRA My Account, or are approaching your payment deadline, paying with your card online ensures your payment is processed quickly.
You can pay your taxes on time
If you’re one of the many Canadians experiencing financial hardship , you may not have cash available to pay your tax debt. While the CRA offers payment plans (more on this below), these may also result in added interest fees.
Paying your taxes off with one lump-sum credit card payment ensures your tax debt is handled on time so you can avoid any unpleasant interactions with the CRA.
Earn points and rewards
Even if you have the funds available to pay your tax debt, you may still benefit from paying your taxes with a credit card if you have a card that allows you to earn cashback or additional rewards.
For example, many cards offer new cardholder bonuses that award users travel rewards points, free credit, or additional cashback if they meet certain spending requirements within an allotted timeframe.
Paying off your taxes can be a great way to meet these spending requirements and cash in on your reward.
However, you should also weigh the online card processing fees against these rewards to see if it’s worth using your card.
DISADVANTAGES OF PAYING WITH YOUR CREDIT CARD
Paying your taxes off with your card may be beneficial. However, there are also some drawbacks you should be aware of before you make the decision.
Credit card interest
Credit cards are notorious for having high-interest rates, which is typically far higher than the interest imposed by the CRA on late taxes.
If you don’t plan to quickly pay your credit card balance off after using it for your taxes, you could end up in even more debt than you started with.
Costly processing fees
PaySimply, the CRAs third-party card processing partner, imposes a 2.5 per cent fee on all PayPal and credit card transactions. This means you’ll pay an extra $2.50 for every $100 you owe and $25 for every $1,000 you owe.
By comparison, bank account transfers are often fee-free and payments made via Canada Post have a flat fee that ranges between $3.95 and $7.95.
Impact on your credit score
If you don’t pay your credit card balance off before the end of the month, it could significantly impact your credit score. One of the key factors that determines your score is your credit utilization .
This measures the percentage of your total available credit that you’ve used and is calculated by credit bureaus monthly. Your credit score could be negatively impacted if your credit usage increases significantly due to a large lump sum tax payment.
ALTERNATIVES TO PAYING WITH YOUR CREDIT CARD
Here are a few alternatives to consider instead of paying your taxes off with your credit card.
Set up a payment plan
The CRA allows taxpayers to set up individual payment plans based on their income and expenses. Once a payment plan is created, the amount will be withdrawn monthly via a pre-authorized debit through your bank. If you go this route though, be aware that there might be interest payments that you’ll need to pay . It generally won’t affect your credit score if you decide to set up a payment plan.
Obtain a personal loan
Requesting a personal loan through your bank may be better than using your credit card. Personal loans often have lower interest rates than credit cards and may offer more favourable payment terms.
Making timely payments either in a lump sum or in separate amounts could also improve your credit history and help diversify your lines of credit, which could positively impact your credit score.
Reassess your tax returns with a professional
If you filed your taxes yourself, then there’s a chance that you may have made a few mistakes.
A CPA could help you identify tax credits and benefits you didn’t apply for, which could significantly lower your tax liability.
Tax debt relief and forgiveness
The CRA may offer tax debt relief and, in rare cases, forgiveness based on extenuating circumstances. However, nothing is guaranteed, and each case is reviewed in-depth before a decision is made. You must contact the CRA directly to discuss relief or forgiveness.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website .
Report an error
Report an error
Editorial standards & policies
Editorial standards & policies
Why you can trust CTV News
Why you can trust CTV News
ADVERTISEMENT
MOST WATCHED
1
LIVE: View of the harbour in St. John's, N.L.
2
Six-year-old Guelph child left behind by school
3
W hat scammers say during vishing phone calls
4
20 22 member of Oceangate mission on the trip
5
CTV National News: Missing sub near Titanic
6
Mist ake sends traveller to Ont. prison for week
7
Detai ls of the Titanic expedition
8
The la test on the missing Titanic submersible
9
Dramati c dashcam video captures wrong-way crash in Ottawa
10
U.S.
Coast guard provides update on missing sub
11
Sikh lea der shot, killed in
B.C.
12
CTV Nat ional News for Monday, June 19, 2023
13
Moment o f bridge collapse in the Ganges River
14
Student u ses loophole to enter NBA draft
15
Eerie gree n light spotted on Jupiter
16
LIVE: PM Tr udeau attends monument unveiling
17
CTV National News: Crisis in ERs this summer
18
CTV National News: Latest on Manitoba bus crash
19
Cat Cafe is pu rrfect place to sip
20
CTV National Ne ws: Book on residential schools
MORE BUSINESS N EWS
Businesses' ch anging credit usage a worrying trend: Equifax
Stock market t oday: Global shares mostly slip after US markets closed for a holiday
Survey says g ender pay gap narrowed in 2022, but still 21 per cent
OPINION |
Should y ou pay the CRA with your credit card?
Chinese e -commerce giant Alibaba announces new CEO and chairman in major management reshuffle
Tourism businesses in a 'dire' state, with debt mounting and demand meager: industry
WestJet is shutting down Sunwing Airlines. What does that mean for consumers?
'Retai l has nine lives' in Canada as 2023 consumer spending strong -- for now: report
YOUR FINANCES
OPINION
Sho uld you pay the CRA with your credit card?
Are you debating whether you should pay your taxes off with a credit card ?Paying your taxes off with a credit card could work to your benefit. However, there are also some considerable drawbacks to take into account, says contributor Christopher Liew.
9 min ago
OPINION |
The pros and cons of sharing your salary with coworkers
OPINION |
Should you take advantage of the First Home Savings Account?
OPINION | Find out how much contribution room is left in your RESP to avoid penalties
OPINION | Is it a good time to buy a new vehicle?
OPINION | How to get the most out of your grocery rebate
OPINION | Dos and don'ts of money while travelling
OPINION | How much of a raise should you ask for in a time of high inflation?
MOST READ
1
Titanic submarine missing since Sunday, search underway
2
H unter Biden charged with failing to pay federal income tax and illegally having a weapon
3
By election results: Who won in four federal ridings?
4
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5
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10
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11
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12
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13
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Search CTV N ews
Advertise o n
CTVNews.ca
Political Ads Registry
About CT V Careers
CTV New s Stox
Press Room
Edito rial Standards & Policies
Cont act Us
CTV News Programs
CTV National News
Po wer Play
W 5
CTV Question Period
CTV News Channel
Local News
Atlantic Barrie Calgary Edmonton Guelph Kitchener Lethbridge London Montreal Northern Ontario Ottawa Prince Albert Red Deer Regina Saskatoon Toronto Vancouver Vancouver Island Windsor Winnipeg Yorkton
CTV News App Video Help Accessibility
Stay up to date on the latest, breaking news
Subscribe to newsletter
© 2023 All rights reserved. Use of this Website assumes acceptance of Terms & Conditions and Privacy Policy
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