Author: Holly Johnson / Source: Wise Bread
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Please visit our Advertiser Disclosure to view our partners, and for additional details.One of the great things about credit cards is that consumers typically don’t have to pay for the convenience of using them at the point of sale. You usually swipe your card, and the merchant bears the 2%-3% transaction fee that covers the cost of processing the payment.
Merchants are actually permitted by law to pass those costs on to consumers in the form of a credit card surcharge, except in the handful of states where such surcharges are illegal. But in reality, most retailers don’t do that for fear of alienating customers.
There are exceptions, though. Some utilities tack on a fee if you want to pay with a credit card. The IRS and universities do the same. Sometimes these fees are a flat amount, say, $3-$5. Other times they’re a percentage of the purchase price, often 2%-4%. That means that even people who use cash back credit cards or travel rewards credit cards choose an alternate form of payment because the fees are larger than the rewards they’d earn.
There are times, however, when it may make sense to pay a fee to use credit. Understanding these situations can save you money and headaches.
Here’s a rundown of the situations where paying a flat convenience fee or a percentage of your purchase can make sense.The rewards you’re earning are worth more than the fee
One of the most common scenarios where it makes sense to pay a fee to use your rewards card is if the rewards you earn are worth above and beyond the fee you’re asked to pay.
For example, let’s say you’re considering paying your federal tax bill with a credit card to earn rewards. The IRS offers three payment processors you can use to pay your bill with credit, the cheapest of which charges a 1.87% fee with a minimum fee of $2.59.
If you owed $5,000 in federal taxes and used a card that offered only 1% cash back, you would pay $93.50 to use your credit card but only earn $50 in cash back.
But if you used a card that offers 2% cash back to pay your federal taxes, you would earn $100 in cash back, which would be more than enough to cover the $93.50 fee.
It would make even more sense if you earn rewards that are worth quite a bit more than the fee. For instance, some experts value United Airlines frequent flyer miles at 3-4…
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