After spending a lot of hours pouring over my taxes this year, I decided to try out paying my taxes with a credit card! Paying CRA taxes with a credit card is definitely possible and there are some drawbacks (e.g. fees), however in some cases it can make sense to pay your taxes with a credit card.
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Paying CRA Taxes With a Credit Card
It is a great feeling to get a refund from the government after you file your Canada Revenue Agency taxes, however, if you have additional income sometimes even with tax credits and tax deductions you still end up with taxes owing to the CRA.
The Canada Revenue Agency has pushed for people to use NETFILE and file online (digitally) instead of filing via the paper route (remember sending the big tax package in the mail or dropping it off?).
Therefore, it makes sense that the Canada Revenue Agency will accept different ways to pay your taxes due, like paying your CRA taxes with a credit card.
Paying with your credit card is clearly not the only option.
First let’s go over the options of paying taxes owing to the CRA.
How Do I Pay Taxes Owing to the CRA?
The Canada Revenue Agency wants to make it easy to pay taxes owing to them, makes sense, doesn’t it?
You can pay your individual taxes owing by:
- Credit card, debit card, Paypal, and Interact e-Transfer with a third party service provider Plastiq or Paysimply
- Online banking (You can set up a bill payment to Canada Revenue Agency using your Social Insurance Number as the account number)
- Using your debit card and CRA My Payments
- Pre-Authorized Debit using CRA My Payments
- Physically visit your financial institution (credit union or bank) and pay taxes owing there if you have a personalized remittance voucher
- Physically visit a Canada Post location and share a QR Code for payment (but there are fees)
- Mail a personal cheque to the CRA with your remittance voucher (how to write a cheque: Address it to Receiver General and write your Social Insurance Number in the memo part of the cheque)
- Wire Transfer (for those who do not have a Canadian bank account)
To make a payment as a business to the CRA, it is more complicated.
It is best to head over to the Canadian government website to specify the exact business taxes you are planning to pay the CRA (e.g. GST/HST, T2 income tax) and see which payment methods are accepted.
For example, for Business GST/HST owed, you cannot use online banking to pay your GST/HST using your business number.
If you do, unfortunately it will go into the CRA abyss because your business number might be mistaken as a Social Insurance Number and you will have to do a lengthy process over the span of months and months to recover that money.
To pay your GST/HST owing, you could either go to the bank using your GST/HST remittance voucher, or mail the cheque to the CRA and make it payable to Receive General (and include your business number in the memo section of the cheque).
Alternatively, you could make a GST/HST payment using a credit card using a third party service provider. Pay GST online through the GST would need to be through Plastiq or PaySimple.
Pros and Cons of Paying Income Taxes With a Credit Card
Here are some of the positives and negatives to consider before you hit ‘pay’ with your credit card.
with a Credit Card
|Fees||The fees to pay with a credit card are at minimum 2.45%|
|Larger sum for credit card bonus||The large tax bill can help you meet a “spending amount” to qualify for credit card welcome bonus|
|Convenience||Easy to pay with a credit card online|
|More time||Credit card purchases usually have a grace period before there is interest charged|
|Credit Card high interest||If you cannot pay it on time, it will become very expensive and negate any credit card points you might gain|
|Security||You don’t have to have your Social Insurance Number saved in your banking details, or write our your SIN number on a cheque when you pay by credit card|
|Unable to pay in Canada||If you are not living in Canada and unable to pay in Canada, paying with a credit card is easier|
Here are the two third party service providers that will allow you to pay your CRA taxes with your credit card.
Both of these third party service providers offer easy payment options and an opportunity for you to earn reward points for payments that you would normally not be able to pay with a credit card for, such as taxes.
Payment Source is a fintech company based out of Toronto and they created PaySimply. They are considered Canada’s leading provider of alternative payment solutions.
You can set up your account and after 6 steps, you’ll have your CRA bill paid.
You can pay your CRA taxes owing using PaySimply and they also have a mobile app which makes it even easier to pay your taxes.
How Much is the Fee for PaySimply?
Here are PaySimply’s current fees:
- Visa, Mastercard, or American Express: 2.5% fee
- Pay with cash or debit at a Canada Post location $3.95-$7.95
- Interac e-Transfer®: 1.0% fee
- Paypal account in Canada: 2.5% fee
- Alipay FX rate is 2.5%
Therefore, let’s say your GST/HST owing was $500. The Canada Revenue Agency will receive $500 and you will pay 2.5% of $500, which is $12.50.
The total amount you will pay is $512.50.
Is the 12.50% convenience fee worth it? You’ll have to decide for yourself (again it can be worth it if you get HIGHER net credit card points or cash back from it).
In addition to CRA taxes owing, you can also pay tuition, childcare, property taxes, and even rent with PaySimply. The same fees depending on method of payment do apply though.
Another third party service provider is Plastiq. There are over 2 million Plastiq users around the world. It was founded by Eliot L. Buchanan who wanted an option to pay for his Harvard tuition with a credit card.
They have headquarters in San Francisco and Vancouver, so yes, Plastiq is available in Canada if you were wondering.
Plastiq allows for same day delivery (to get same day delivery you would normally have to go into a financial institution branch to pay your bill or to go to a Canada Post location) and you also don’t have to create a Plastiq account to pay your bill.
Plastiq Canada Payments
Which CRA payments can you pay through Plastiq with a credit card?
You can pay these CRA payments with Plastiq:
- T1 Personal Tax
- T2 Corporation Tax
- Excise Tax
- Benefits and Credits
- Withholding Taxes for Non-Residents
- Excise Duty
- Fuel Charge
How Much is the Fee for Plastiq?
The CRA credit card fee (using Mastercard, Visa, American Express) is 2.49%.
If you are using Plastiq for bill payments that are NOT Canada Revenue Agency related, the fee to use your Mastercard, Visa, or American Express is higher, and it is 2.85%.
Some of the non-CRA payments that you can pay with Plastiq are:
- Auto loans
- even Club memberships
Do You Need To Sign Up with Plastiq?
You are able to pay your tax bill as a guest and you don’t need to sign up with Plastiq.
There are some benefits to creating a Plastiq account though such as earning Fee Free Dollars.
Plastiq is the lowest credit card payment provider to the CRA.
This is what it looks like after you have paid your bill.
The content is not provided by the issuer. Any opinions expressed are those of the genymoney.ca alone, and have not been reviewed, approved, or otherwise endorsed by the issuer.
The other positive if using Plastiq is they have an option to pay using “Fee-Free-Dollars” or FFDs. You can earn Fee-Free-Dollars through promotions that Plastiq offers in addition to referrals to other Plastiq users.
For each $1 in Fee-Free-Dollar that you have, that means you don’t have to pay the Plastiq convenience fee of 2.49% or 2.85%.
The Plastiq Referral Program allows you to earn 2,500 FFDs. When you refer a business who sign ups with your referral link and they make a payment of more than $2,500 within 30 days of sign-up, you will both receive a Fee-Free Dollar bonus: 1,000 FFDs for your referral and 2,500 FFDs for you.
The FFD bonus is added to your Plastiq account within 2 weeks of the action being completed.
Unfortunately the FFD do expire 90 days after being credited to your account, so if you have infrequent payments (e.g. annual payments to the CRA) the Plastiq referral program may not work for you.
Paysimply vs Plastiq
Which one is better if you are paying a tax bill to the CRA?
Well in absolute numbers, Plastiq’s CRA fee is lower if you are paying by credit card.
|Credit Card Fee for CRA||2.5%||2.49%|
|Referral Option||No||Yes, Fee-Free Dollars|
|Need to Sign Up for an Account||Yes||No|
|Payment Processing Time||3 Business days||Same day|
|Security and Safety||Recommended by the CRA||Recommended by the CRA|
|How Much a $5000 Tax Bill Costs||$5125.00||$5124.50|
Previously the Plastiq fee was slightly more lower than Paysimply, but now the difference is almost negligible.
They are both similar but if you are wanting a faster payment and if you have the potential to earn Fee-Free Dollars, then Plastiq would probably be better.
If you plan to use your credit card to pay for other things, like tuition, or utilities, or rent, then PaySimply has a lower overall fee structure compared to Plastiq.
How Do I Make a Payment to the CRA?
Does CRA accept credit card payments? Yes they do but only with Plastiq or PaySimple.
With PaySimply, you just simply follow the prompts and provide the information on the specific CRA tax bill you are paying and you log in via PayPal to pay your bill.
With Plastiq, you select which taxes you are paying (for example, your T1 personal income or your T2 corporate income) in the drop down menu.
Then you input the amount of tax you are paying and your email address.
The next step is sharing your first and last name, business name (if applicable), your contact information and finally upload some documentation (for example a remittance voucher)
With Plastiq, you don’t have to log into or sign up for an account to pay taxes with your credit card.
When Does Paying Taxes By Credit Card Make Sense?
Since the fees are either 2.49% or 2.5% to pay your CRA taxes with a credit card, when does paying taxes by credit card make sense?
Well, there are certain scenarios where it would make sense.
10% Cash Back Credit Cards
For example, if you have a welcome bonus for a 10% cash back credit card that you haven’t yet used (and have been approved for a larger credit limit) you will still be having a net 7.5% cash back or 7.51% cash back after the PaySimply or Plastiq convenience fees. And this is if your tax payable amount is under the cash back threshold (like $2000).
These credit cards will work better if you don’t have to pay the annual fee or if it is ‘first year free’.
Some 10% cash back credit cards in Canada with FYF include:
There is a limit to the amount of 10% cash back that you can redeem, and for most of these, it’s around $2000 in spending, so around $200 cash back.
The downside is that you can’t really control the credit limit that you are given, so if you are given a lower credit limit (like CIBC tends to do for me) it might be difficult for you to pay your entire CRA tax bill if it is on the higher side.
Requiring A High Minimum Purchase For Welcome Bonus
Some other travel credit cards require a minimum spend in order to get more points, for example.
In this example I’ll highlight using something like the TD First Class Business Visa, but you could calculate this for most travel credit cards that have a welcome bonus and are First year Free.
The TD First Class Business Visa credit card has a welcome bonus of 30,000 TD Rewards points on your first purchase, but an additional 60,000 TD Rewards points if you make purchases on the credit card of $5000 over the next three months after account activation.
$5000 in the span of three months is no small feat!
Is it worth it to earn 60,000 TD Reward
How much is 60,000 TD Rewards points worth?
If you’re using it towards travel and booking with TD for Expedia, 60,000 TD Rewards points is worth $240.
Some people may find it difficult to spend $5000 in three months, and if so, paying a large tax bill may help provide a solution to having to meet the minimum spend to qualify for a welcome bonus.
On a $5000 tax bill it is about $125 in fees for PaySimply or Plastiq, and earning 90,000 TD Rewards points (if you use it for a first purchase and it is a minimum spend of $5000) is worth $360, so the net ‘bonus’ is $235.
Having 90,000 TD Rewards points and a trip to look forward to might make the sting of paying $5000 in taxes less painful.
Confirming Payment to the CRA
Whatever method you choose, you can confirm your payment to the CRA using the My CRA portal or the My Business Account CRA portal.
Go to Statement of Account to see your payment in the My CRA portal.
Go to “View and Pay Account Balance” in your My Business Account.
Hope you found this useful to see how to pay your CRA taxes with a credit card if you choose do so (after weighing the pros and cons to paying with your credit card).
There are few certainties in life, death and taxes, you might be able to find a way to make paying Canada Revenue Agency taxes less painful (by gaining credit card rewards or cash back) with a little bit of planning.
Of course, it goes without saying that if you are unable to pay the complete balance off once your credit card statement comes, then paying your CRA taxes with your credit card will most definitely not be ‘worth it’.
You might also be interested in:
- Tax Filing Software in Canada
- Blogging Tax Deductions in Canada
- How to claim business use of home expenses in Canada
- Paying property taxes with a credit card
- Paytm Canada review
Have you tried paying CRA taxes with a credit card?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.