Comments on: Paying Your Taxes with American Express Membership Rewards Points – Deal or No Deal?

By: JoeTaxpayer

JoeTaxpayer — Thu, 28 Jan 2010 14:21:09 +0000

Wow, what a horrible deal.
The 2% is the least of it, they first discount the points 50%?
If a friend told me they were doing this, I’d give them 90% of Home Depot value, as it might take some time to spend at that one store. But 50%?
I don’t know what else those points can be used for, but I’d stay clear of that card altogether, too complicated for a bad deal.
I have a Amex Open – 5% back at office supply stores 3% for gas. Don’t use it elsewhere.
A Fidelity affinity card thru MBNA which gives 2% cash into a 529 account. This is 4X what that Amex card offers.

By: Doctor Stock

Doctor Stock — Thu, 28 Jan 2010 04:46:38 +0000

Interesting… I personally have a bias against American Express… I had a horrible experience I won’t get into.

By: Ace of Wealth

Ace of Wealth — Wed, 27 Jan 2010 20:38:17 +0000

Adam, this is great. I knew that there were disadvantages for using rewards to directly pay for things (student loans, CC bills are other areas where you won’t get top dollar for your rewards) but I never had the facts so plainly painted out for me.

As you pointed out in your concluding paragraph as is the same with many if not all financial decisions being informed is the key. Great post!

By: Nickel

Nickel — Wed, 27 Jan 2010 16:38:24 +0000

Adam: You see similar things (re: cash discounts) at gas stations. I agree that it’s a silly distinction. Seems like it should either be okay or not, instead of splitting hairs like this.

By: Adam Jusko

Adam Jusko — Wed, 27 Jan 2010 15:56:45 +0000

I think it’s an issue of semantics. The government is not directly accepting your credit card — the outside company is accepting your card and then forwarding the tax portion to the government. The outside company charges a fee for the service, which I am guessing covers the credit card transaction fee plus leaves a little left over to make the transaction profitable for them — they don’t call it a credit card fee, so it’s within the credit card companies’ rules.

The difference between this and how a merchant works is the fact that the merchant accepts both cash and credit, and is not allowed to charge credit customers more money. In the ultimate display of semantics, however, that same merchant CAN offer a discount to customers that pay in cash — for example, if the posted price is $5.00, a merchant could post that cash-paying customers would only be charged $4.90. Same difference, but credit card companies do not want merchants “penalizing” credit customers for using their cards — but they’re OK with rewarding cash customers. Silly, but that’s the deal.

By: Funny about Momey

Funny about Momey — Wed, 27 Jan 2010 15:34:29 +0000

Interesting issue. One thing that puzzles me: If the U.S. government can get away with directly charging credit-card users the fee that card issuers charge for each transaction, why can’t merchants do the same?

As it is, we all pay extra for just about everything, because merchants who are now forced to accept credit cards if they want to stay in business pass the costs along to everyone by raising prices. If credit card users were charged the transaction fee, the rest of us might have lower costs. And I expect a lot of people would pay in cash, forestalling the epidemic of credit-card debt we’ve seen in this country.