Should You Pay for Property Taxes with Credit Cards? — FIbyRE
As a real estate investor, you have many opportunities to score a great credit card welcome bonus. With properties to maintain, a big expense is never too far away.
One of those recurring expenses is your annual property tax bill. Property taxes can add up quickly especially if you have multiple properties. Even if you are house hacking with a single property, taxes will always be a necessary expense. Instead of simply paying your property taxes each year, what if you could optimize that unavoidable expense of real estate investing?
By choosing to pay your property taxes with a new credit card, you may be able to score a welcome bonus to fund your next vacation. Even if you don’t score a welcome bonus, the value of the points could be worth the purchase.
Let’s dive into whether or not you should take advantage of this credit card points opportunity.
Run the numbers
Before you make a decision, you’ll need to run the numbers.
Unfortunately, most states charge a fee to process the property tax payment via credit card. With that, it is not always a financially sound choice to pay your property taxes via credit card. The fee will vary by the country or parish, so you’ll need to run the numbers on your real estate investments. For each transaction, you’ll need to weigh the fee against the benefits of the credit card rewards points.
The first thing to determine is what fees you will be charged to pay your property taxes with a credit card. Generally, this is a percentage of your payment amount but it could also be a flat fee in some states.
Once you know what it will cost to make the transaction via credit card, you’ll need to determine the total value of your travel rewards points. You need to know how many points you will receive plus what each point can be redeemed for. The value of your points will vary based on the credit card you choose.
For example, Capital One Miles are worth 1.4 cents per point. However, Barclaycard Arrival Miles are worth 1 cent per point. You’ll need to find out how points are valued based on your card.
Find out what your chosen credit card’s points are worth in our travel rewards guide.
Take the number of points you will earn and multiply them by their value to determine exactly how much your spending would be worth. Compare that to the cost of the transaction to determine whether or not it is worth it to pay your property taxes with a credit card.
Case study
In a real-life example, I paid property taxes on three properties in North Carolina with my credit card. The county that accepted the taxes allowed online transactions with an ACH debit at no charge or with a credit card. The credit card transaction had a 2.3% fee associated with it. I had three tax bills to pay which came to a total of just over $3,500 in taxes. With that, the fee came out to $80.50.
First, I ran the numbers against my daily use card, the Chase Sapphire. With that card, I would have earned 3,500 points which would be valued at $70. Since that is less than $80, it did not make sense.
Instead, I decided to sign up for a new credit card and score the welcome bonus. I opened the card in November so that I could pay the bill by the end of the year. The card offered 50,000 points as a welcome bonus after spending $3,000 in the first three months. With the tax bill, I easily met that requirement. Although it varies by the card, a welcome bonus of 50,000 points is worth between $500 to $750. In that instance, it makes sense to pay an $80 fee to score over $500 in points.
Depending on the fee in your county, it could be the perfect opportunity to score a valuable welcome bonus.
The bottom line
Property taxes represent an opportunity for real estate investors and house hackers to land an amazing signup bonus. Run the numbers to find out whether or not this is a good strategy for you. Check out this article on tracking and maximizing your travel reward points: https://fibyrei.com/tracking-and-maximizing-your-travel-rewards-points/
Originally published at https://fibyrei.com on March 20, 2020.
