How Much Money Do You Lose to Taxes, and Do You Care?
About half of Americans would rather get a bigger tax refund than an extra $115 per paycheck, according to a recent survey Credit.com conducted. But a bigger tax refund isn’t always a good thing. Learn more about what you can do with a larger paycheck.
Methodology
Note: This survey was conducted for Credit.com using Suzy.com. The sample consisted of a total of 1,028 responses per question and is not statistically representative of the general population. This survey was conducted in October 2022.
In This Piece
More Than Half of Americans Prefer a Larger Tax Refund
What Can You Do with a Bigger Paycheck Instead?
How Can You Earn More Money Throughout the Year?
Ways to Get a Bigger Tax Refund
More Than Half of Americans Prefer a Larger Tax Refund
We asked more than 1,000 people aged 18 to 99 whether they’d like a $3,000 tax refund or $115 more in take-home pay on each paycheck. Surprisingly, 52% of the respondents in our tax refund survey said they’d take the bigger tax refund.
Men were more likely to choose the bigger tax refund, at 54.2%, and millennials aged 25 to 34 were the most likely age group to choose the bigger tax refund. People aged 18 to 24 were least likely to say they’d take the bigger tax refund.
It’s important to note that in many cases, getting a tax refund means you overpaid the IRS throughout the year. You could’ve kept the money yourself and put it to work for all those months instead of letting the government earn interest on it. If you’re not sure what your tax refund might look like, see how you can maximize your tax refund so you can plan ahead.
What Can You Do With a Bigger Paycheck Instead?
To find out how much money you lose to taxes, learn how to read a pay stub so you can add up your tax payments. If you’re paying too much and getting a refund every year, you can adjust your withholdings to get more out of your paycheck every payday. Here are a few things you can do with a bigger paycheck:
Invest more in retirement. When you’re paying less to the federal or state government every pay period, you have more money to invest in retirement. If you were already getting along without this extra money every pay period, it might be a good idea to contribute it to a 401(k) or other tax-deferred accounts. If your employer offers a contribution match, this is a great way to maximize retirement savings.
Pay off more debt. Alternatively, funnel that extra money every paycheck into paying off debt. Every little extra bit you can pay off each month cuts down on long-term interest expenses, so you may be able to save yourself a lot in the long term.
Invest in savings accounts. Sock the money away in savings accounts with high-interestyields for an easy, safe way to earn a little money on your cash. Savings accounts also ensure your money is readily available if you need it.
How Can You Earn More Money Throughout the Year?
What if you’ve already adjusted your tax withholdings so you’re not losing money every pay period to taxes unnecessarily? If you want more take-home income every month, you may have to look for other ways of earning money, including:
Side hustles. Join the gig economy to make extra money delivering groceries or food, writing content for others, doing surveys or market research, babysitting, walking dogs or any number of other tasks. Remember that, as a freelancer, you’ll be responsible for paying taxes on anything you earn via a side hustle.
Investments. Make investments so your money is working for you. You might invest in stocks and bonds, more conservative options like CDs or property you can rent or flip for a profit.
Asking for a raise. Boost your paycheck by asking for a raise if you think you’ve earned it, your current job duties have grown and aren’t in line with your pay or you haven’t had a cost-of-living adjustment in some time.
Getting help with finances. Get help managing your finances so you can reduce your debt or interest payments. If you can lower how much you need to pay on debt every month, you have a lot more discretionary income to work with.
Ways to Get a Bigger Tax Refund
If after everything above you still agree with the 52% of respondents in our survey who said they’d rather have a bigger tax refund, there are some things you can do to get one. They include:
Adjusting your withholdings so more is taken out in taxes each paycheck. Note that this will reduce how much you take home out of each paycheck.
Maximizing your tax refund. While you can do your taxes for free, you may find paid tax filing software has more options for increasing your refund via credits and deductions.
Get expert help with taxes. Work with professionals who can help you learn more about your tax situation and how you can maximize your refund. Start with information on Credit.com to get help with your taxes.
According to the National Retail Federation, almost half of all consumers say they expect to file their taxes in February. Those who are expecting refunds often want to get their returns in early to maximize the chances of a quicker refund. If you know you’ll owe taxes, you might push off filing your refund until April so you have more time before you pay it, but what happens if you file your taxes late?
In This Piece:
1 in 4 People File Taxes Late
Busy Lives Interfere With Filing Taxes on Time
Older Generations Need More Help Filing Taxes
Why You Should File Your Taxes on Time
How Can I Make Sure I File Taxes on Time?
1 in 4 People File Taxes Late
We asked more than 1,000 people if they’d ever filed their tax returns late and followed up with a few questions about why someone might file taxes late. Just under 1 in 4 of survey respondents said they’d filed taxes late.
Our survey indicates that men are slightly more likely to file taxes late than women are. Around 25% of men in the survey said they’d filed taxes late before, while only around 20% of women said the same. Younger and middle-age individuals are also more likely to file taxes late than older generations. Around 46% of survey respondents aged 25 to 49 said they’d filed their taxes late at least once.
Busy Lives Interfere with Filing Taxes on Time
When asked what might cause them to file taxes late, 75% of people aged 18 to 49 said they just didn’t have enough time. Being too busy was the top reason given by people aged 18 to 34. Around 30% of men listed lack of time as a reason they might miss a tax deadline, making it the top answer for men. Only around 18% of women cited lack of time as a reason for failing to file taxes on time. For women, the most common reason was needing professional help with taxes.
Older Generations Need More Help Filing Taxes
For people aged 35 and older, requiring professional help with taxes was the top reason for filing late. This becomes even more common with each age bracket:
Age 35-49: 25.5% said they need professional assistance filing taxes
Age 50-64: 33.2% said they need professional assistance filing taxes
Age 65+: 43.4% said they need professional assistance filing taxes
Aside from being busy and needing assistance, other reasons people gave for not filing taxes on time included:
The costs of filing being too high
Being too confused by taxes
Forgetting when the deadline is
Being unable to pay what’s owed
Why You Should File Your Taxes on Time
Filing your taxes on time is the law. It also keeps you from owing late filing fees and penalties.
What Is the Penalty for Filing Taxes Late?
The IRS charges steep penalties for failure to file your taxes. It’s 5% of the taxes due for every month the return is late—up to 25% of the taxes you owe.
However, in 2020, 2021 and 2022, if your taxes are more than 60 days late, the minimum filing penalty is $435 or 100% of the amount of taxes you owe, whichever is less.
What Happens If You Are Late Filing Your Taxes?
If you file your taxes late using a paid or free tax preparation software, it may help you calculate how much you owe in penalties. That amount will be included on the paperwork you generate showing you how much to pay. If that’s not the case and you file a return without calculating those amounts, the IRS is likely to send you a bill for the penalties.
Note that you’ll also owe interest on your total tax bill. The IRS charges interest on penalties and late taxes.
How Can I Make Sure I File Taxes on Time?
You can take a few steps to ensure you file your taxes on time, including:
Filing for an extension. You can file an extension each year. If you file by the April tax deadline, the IRS automatically grants you an extension for 6 months, which can provide you more time to gather the documents you need or get help with taxes. However, the extension is for filing your return online, not paying what taxes you might owe. If you pay late, you may be charged interest.
Preparing properly for tax season. Preparing well ahead of tax season can help you file on time. Keep your finances organized throughout the year. You might also have a folder to keep paperwork related to taxes–both physically and digitally.
Getting professional help. Get help from tax preparers or accountants to file accurate tax returns on time. Reach out to professionals sooner in the tax season to ensure they aren’t booked up.
Better Late Than Never
If you owe taxes and miss the tax filing deadline, it’s better to file late than to continue to avoid the issue. Reach out to a tax professional if you’re not sure how to file your taxes or need help understanding if you can reduce your tax burden.
Methodology
This survey was conducted for Credit.com using Suzy. The sample consisted of a total of 1,035 responses per question and is not statistically representative of the general population. This survey was conducted in October 2022.
Let’s say that you find yourself with some tax debt this year. It’s less than ideal—if you’re scrambling to pay off your tax debt, it might have a huge impact on your financials. But does tax debt affect your credit score? And does an IRS collection go on your credit report?
The IRS doesn’t report directly to the credit bureaus. And a tax lien won’t show up on your credit report either. But that doesn’t mean taxes won’t impact your credit score. Read on to find out more about how federal taxes and credit can be related.
Does IRS Collection Go on Your Credit Report?
The IRS doesn’t report information about the taxes you owe, when or how you pay them or whether you’re in collections to the credit bureaus. In fact, the Taxpayer Bill of Rights includes a right to privacy and confidentiality. That means that in many situations, your tax information is not public knowledge.
What does this mean?
Your payments on a tax bill, whether on time or otherwise, generally don’t impact your credit positively or negatively.
If you’re late paying your taxes, the IRS won’t report that information to the credit bureaus.
The IRS itself typically won’t report your debt to the credit bureaus at all.
Does IRS Debt Ever Show up on Your Credit Report?
Prior to April 2018, federal tax debt could show up on your credit report via another path. If the IRS files a tax lien against you for taxes owed, the information becomes public record. That’s true of most liens.
Credit reports used to include information about liens. In April 2018, the credit reporting agencies modified policies on how certain public records, including liens, were dealt with. That included removing all tax liens from credit reports.
What does this mean?
Tax liens won’t show up on your credit report, so tax information probably won’t ever show up.
This is due to a policy change from the credit bureaus, though, and that can always be reversed if things change.
Tax liens are still public records, so creditors or others can find out about them if they look.
How Do Taxes Affect Your Credit Score?
Just because taxes don’t appear on your credit report doesn’t mean they won’t have an impact on your credit score. If you’re behind on taxes or dealing with paying off a large tax bill, that could have an impact on your overall finances. In turn, that could negatively impact your credit score. Here are a few ways this can happen:
You Prioritize Tax Debt Over Other Debt
In the worst-case scenario, you might make payments on tax debt instead of payments owed on a mortgage, car loan or other debt. If you do this for several months, you could risk serious issues like foreclosures or repossessions. Even if you only do it for a month or two, you can end up with late payments reported on your credit report. All those things are bad for your score.
In less severe cases, you might be able to make tax payments while also making timely payments on your other debts. But perhaps you’re not paying down balances on those debts quickly because you’re prioritizing your tax debt. That can lead to a higher credit utilization ratio for longer, which can impact your credit score.
You Use Revolving Credit to Pay Taxes
If you aren’t starting with a large balance on your credit card accounts, you might think about using them to pay down your tax bill. That’s one way to remove the stress of a potential tax lien. For many people, the interest expense of paying off some credit card debt is preferable to facing consequences from the IRS.
But this option does impact your credit score. If you max out or drive up your credit card balances to pay off tax debt, you increase your credit utilization ratio. Credit utilization is about 30% responsible for your credit score, so that can make for a big impact!
You Take Out a Loan to Pay Taxes
Instead of revolving credit, you might use an installment loan to pay off some tax debt. Whether you’re taking out an unsecured personal loan or a home equity loan, this new debt will have at least some impact on your credit. First, there’s the hard inquiry that may be required to evaluate you for the loan. Hard inquiries can negatively impact your credit score a bit.
Then there’s the fact that you have a new account on your credit score. That can also cause a temporary drop in your score if it changes the overall age of your credit.
It’s Important to Deal With Taxes Promptly
Tax debt doesn’t magically go away, and the impact to your life and finances can get bigger the longer you ignore the issue. If you owe taxes, make a plan to pay them as soon as you can.
Does filing taxes late affect your credit score? Not directly, but it can lead to all the issues discussed above. If you know you’ll owe taxes, don’t avoid filing because you can’t pay. Interest on tax debt is often less than the fines for not filing your return on time. You can also reach out to the IRS to set up installment plans or other payment arrangements on large tax bills.
It’s also a good idea to be familiar with how your other debts might impact your taxes. For example, if a creditor forgives your debt and sends you a 1099C cancellation of debt, you may need to pay taxes on that amount.
Learning how to do your taxes yourself and getting a head start on the process every year can be a good idea to get ahead of tax debt. When in doubt, consider consulting a tax or financial professional to help you come up with the right plan for you.
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The exact answer to this question depends on your employer. The IRS gives employers two methods they can use when determining how much tax to withhold when disbursing your bonus payment. Employers can use the percentage method or the aggregate method.
Below, we explain both methods and some of the benefits and drawbacks of each.
The percentage method is the easiest and most common option employers use when disbursing bonuses. With this method, your employer will send you a separate payment just for your bonus. Your employer will also deduct a flat 22% from your bonus for federal taxes. If your bonus is over $1 million, your employer will deduct 22% from the first million dollars and then 37% for any part of the bonus over $1 million.
You don’t actually owe 22% of your bonus in federal taxes. Rather, your actual tax liability depends on your taxable income and filing status. Depending on your specific situation, you may receive a tax refund if your tax withholdings were too high.
Pro: This is the most common method because it’s easy for the employer.
Con: If you make over $89,076 per year, your effective tax rate is higher than 22%, which means you may get a tax bill because not enough was withheld from your bonus.
Bonus:
$1,000
Federal taxes withheld:
$220 ($1,000 x 22%)
Take home amount:
$780
The Aggregate Method
With the aggregate method, your employer includes your bonus on your regular paycheck. Using this method, your employer adds your bonus payment to your regular wages and withholds taxes based on the information listed on your W4 form, such as any deductions and tax filing status.
The added money on your paycheck could push you into a higher tax bracket. If this happens, your employer may withhold too much. However, you can obtain a refund for any taxes you overpay.
Pro: This is typically better for the employee because there’s less of a chance a surprise tax bill due to not enough being withheld.
Con: The calculation may be more difficult on the employer’s end, so they may withhold too much, but you can get a tax refund for the amount.
Example of the percentage method:
If you make $5,000 per month broken into two $2,500 paychecks, you’ll make $60,000 per year, putting you in the tax bracket of 22%.
One month, you reach a work incentive and make an extra $1,000. The employer would take the 22% out of $3,500 rather than $2,500. If for some reason, it was a large enough bonus to put you into a higher tax bracket, the employer would withhold the higher percentage.
There are some exceptions to these rules, and these exceptions revolve around if your bonus qualifies as an employee achievement award. In the following instances, you may be exempt from federal income taxes on the bonus:
The award comes in a form other than cash or a cash equivalent like a vacation or stock options
The award is personal property that is tangible
The total value is less than $1,600
Five Ways to Minimize Tax Withholdings from Your Bonus
The goal of most people when preparing for tax season is to get a tax refund and not owe anything when they file. Here, we list some ways to minimize the impact your bonus has on your taxes.
1. Check your Form W-4
As listed in the pros and cons for the two different methods for how bonuses are taxed, the decisions are up to the employer. When you receive your Form W-4 to file your taxes, review it to ensure there were no errors. The last thing you want is for the bonus to be filed in error and push you into a higher tax bracket.
2. Find out if your bonus is taxable
Review the exceptions for what types of bonuses are taxed. If you received tickets to a show or sports event or received a low-value gift, you may not owe any taxes on it. You can also review your state guidelines because they may not have a supplemental tax rate.
3. Know what can be deducted on your taxes
There are many ways to lower your taxable income, and they come in the form of tax deductions. This can take some research, or you can hire a tax professional.
4. Use a tax-advantaged account
A tax-advantaged account is any type of financial account that includes tax benefits, which can include tax-deferred accounts, investments, and savings plans. One of the most common ones is a 401(k) retirement account through your employer. If you contribute your bonus to this account, it can reduce your taxable income while also helping you save for your future.
5. Wait on the bonus
You may want to defer your bonus until the next year if it’s going to put you into a higher tax bracket. This may seem like an odd request to your boss or employer, but it’s common for those who receive large bonuses.
Preparing for Tax Season
One of the best things you can do to minimize your tax burden every year is conduct an annual review of your W4 to make sure the information is correct. For example, check your filing status, dependents, and other adjustments. Your employer uses this information to determine your tax withholdings, so it’s crucial to make sure this information is correct.
It’s important to know how to do taxes yourself step-by-step. Understanding this process can help you minimize your tax burden by making sure you take advantage of all the tax credits and deductions you can. After all, does the IRS catch every mistake? Of course not. This means that if you haven’t done your research, you could miss out on tax deductions that could save you money.
Alternatively, you can have a professional complete your taxes to ensure they’re done right. Credit.com can provide more tax-friendly tips and show you how to get a bigger tax refund.
People with qualifying children can claim the child tax credit on their federal tax returns to help reduce their tax burden. The child tax credit is reverting for the 2022 tax year.
If you have dependent children under the age of 17, you may qualify for the child tax credit. This partially refundable tax credit can help offset how much you owe in taxes or even provide a refund. You may qualify for a portion of this tax credit even if you don’t owe taxes.
In 2021, the American Rescue Plan Act of 2021 increased the amount of the child tax credit to $3,000 per qualifying dependent. However, this extra boost has now expired, and child tax credit rates for 2022 revert back to the previous level of $2,000 per dependent.
If you think you might be eligible for the child tax credit, keep reading to learn more.
In This Piece
What Is the Child Tax Credit?
The child tax credit is part of the Taxpayer Relief Act of 1997. It’s specifically designed to help reduce the tax liability for parents with dependent children aged 17 and under. As a partially refundable tax credit, it’s possible to receive a refund for this credit, even if you don’t owe taxes or if the amount of the credit exceeds how much you owe in taxes.
Studies show that the combination of the child tax credit and the earned income tax credit helps pull millions of children out of poverty every year. For example, in 2018, this combination helped push 5.5 million children above the poverty level.
To obtain this tax credit, you must list your dependents’ information on Form 1040 and complete Schedule 8812, Credit for Qualifying Children and Other Dependents.
How Much Child Tax Credit Will I Get This Year?
As mentioned above, the child tax rate for 2022 reverts back to the previous level. The maximum child tax credit for 2022 is $2,000 per qualifying dependent. For example, if you have two qualifying dependents, you can earn a tax credit of up to $4,000 ($2,000*2).
If you’re filing as head of household and earn more than $200,000 or filing as married and earn more than $400,000, you may not receive the full amount. If your adjusted gross income (AGI) exceeds these income thresholds, the child tax credit amount slowly starts to phase out. This phaseout rate is $50 per every $1,000 over the income threshold.
For example, if you’re filing head of household and your adjusted gross income is $220,000, your tax credit amount is reduced by $1,000 (($220,000-$200,000)*$50)). This means your tax credit for the year is $1,000 ($2,000-$1,000).
Additionally, the child tax credit is not fully refundable. If your tax liability is lower than your child tax credit, you’re only eligible for a partial credit of $1,500 per qualifying dependent. In the event your earned income is less than $2,500, you may not be eligible for the child tax credit.
If you have dependents between the ages of 17 and 24, you may be eligible for a $500 child tax credit for other dependents. This is a nonrefundable credit, so it can only help reduce your overall tax liability.
How Do I Qualify for a Child Tax Credit?
To be eligible for the child tax credit, you must first have an eligible dependent. This dependent must meet the following conditions:
The child must be under the age of 17.
You must claim this child on your current year’s tax return.
The child must be related to you, such as a child, stepchild, sibling or eligible foster child or a descendant of any of these.
The child must be a U.S. citizen, national or resident alien.
You must provide at least one-half of the financial support for the child.
The child must live with you for at least one-half of the year.
You must also meet income requirements by earning at least $2,500 throughout the year.
Who Is Eligible for the Child Tax Credit?
To be eligible for the child tax credit, you must have a qualifying dependent you claim on your current year taxes and provide more than one-half of their care. You must also earn at least $2,000 during the year.
How to Prepare for Tax Season
If you’re doing your taxes yourself, make sure you take all the eligible child tax credits and tax exemptions. You can also use online tax preparation services to ensure you obtain all the tax credits and deductions you can. This step can help reduce your overall tax liability and even help you earn cash back.
If, after taking all the eligible tax credits and deductions you can, you still owe taxes, you must pay this debt by Tax Day. There are a number of ways you can pay your taxes, including credit and debit cards, cash, check, wire transfer, and even installments.The important things are to make sure you file your taxes on time, take all the tax credits and tax deductions you can and pay any tax liability on time. Once you file your taxes, you can use the government’s track my child tax credit site to find out when you can expect to see these funds.
Owning a home comes with expenses other than a mortgage payment. One of those expenses is property tax, which is typically paid to local governments such as counties and cities or even some school districts. In fact, property taxes make up around 17% of state and local revenue, coming in above sales tax and individual income tax as a way municipalities earn money for programs including schools, libraries and roads. While property tax money does go toward important things, you obviously don’t want to pay more than you have to and might wonder why your property taxes are higher than your neighbor’s.
Find out more about how property taxes are calculated below. Then get some tips for potentially lowering your property taxes.
How Are Property Taxes Calculated?
Property taxes are typically a percentage or portion of the assessed value of a home each year. To figure out how much your property tax is, you’ll need the following:
The current assessed value of your home. You should receive information from your tax assessor’s office when an assessment is performed. Some municipalities send out an assessment value yearly. If you don’t have an assessment value, contact your city or county tax assessor’s office.
The percentage or amount of tax charged by your municipality. You can usually find this on the municipality or tax assessor’s website. For example, in Roanoke County, VA, real estate is taxed at $1.09 per $100 of assessed value.That’s a property tax percentage of 1.9%.
Once you have those pieces of information, you can figure out what your property tax might be. Let’s use the Roanoke County example above to understand how the numbers might work.
If you live in Roanoke County and your home has an assessed value of $200,000, the formula for figuring out the property tax would be $200,000 x 0.019. The amount is $3,800.
It’s important to note that property taxes are not calculated based on how much you paid for a home or how much you owe on it. The assessed value can go up or down depending on factors such as the state of the market, changes in the neighborhood or changes you make to your own home.
The tax agency responsible for collecting your property tax will send you a bill with the amount you owe. But knowing how it works helps you ensure your property tax bill is accurate.
In some cases, square footage can impact property taxes. That’s because square footage is generally a factor in how much your property is assessed for. More square footage—especially more livable square footage—could increase your assessment. That, in turn, can increase your tax.
So, how do tax assessors calculate square footage? They get information from the city or county or another reporting agency.
Does Lot Size Affect Property Tax?
Yes, lot size can affect property value—which in turn can affect your property tax. If your lot is substantially bigger than other lots in your area, that could mean your property tax is higher than your neighbor’s—especially if all other factors are equal.
Tips for Reducing Your Property Tax
Your tax bill isn’t set in stone, and you do have some options for disputing it or reducing your property tax in the future. If your property tax is more than your neighbor’s or if you’re just surprised by how much it is, check out some of the tips below to see if you can get it reduced. If these tips sound like good options for you, it might be worth working with a property tax professional to help make your case.
1. Start with Your Tax Assessment
Review your tax assessment to ensure it seems correct. When the value of your property changes, you should receive notice in the mail. If the value suddenly jumps and you see no reason for that to happen, contact the assessment office and ask for details. In some cases, you can get a detailed listing of how the value was arrived at.
Go through that information and find anything that looks wrong or off. Did the assessor assume you upgraded fixtures when you didn’t? Is the square footage correct?
If you can get facts like this corrected on the assessment, your assessed value might go down. That, in turn, lowers how much property tax you have to pay.
2. Get Involved with the Assessment
The sooner you get involved with the process, the easier things might be to correct. If you wait until the assessment is complete and the property tax bill is issued, it can be harder to dispute the amount for that year.
If the assessor walks your property or comes inside your home when valuing your property, make sure you’re present to answer questions. This can help reduce misinformation that could unnecessarily increase the value of the assessment.
In many locations, you don’t have to allow the assessor access to the inside of your home. In some areas, the assessor might not automatically ask for this. Contact your property tax office to find out if an assessor can come inside your home to get the most accurate picture of your property’s value.
3. Hire an Independent Assessor
If you’ve tried to work with the assessor’s office and still feel the value of your home is being inflated, you could hire an independent assessor. An assessment from a private company won’t automatically reduce your property tax, but it can be helpful if you plan to dispute the assessed value of your home.
4. Research the Assessed Value of Similar Homes in Your Area
This is another good step to take if you plan to file a tax appeal. Look for homes in your area with similar lots, square footage and amenities. If, for example, you have a home on a 1-acre lot with three bedrooms, two baths and 1,600 square feet, you’ll want to use homes that are as close to those specs as possible.
Look up the assessed value of those homes in public records or ask your neighbors for a copy of their property value assessment. If all the similar homes in your area are valued at around $200,000 and yours is valued at $275,000, a mistake might have been made that you can get corrected.
5. File a Tax Appeal to Change the Value of Your Home
Research how to file a property tax appeal in your location. First, check the property tax assessment letter to see if there are options or instructions for appealing it. Next, reach out to the assessor’s office and the property tax office for your municipality to find out more about the process. You may need to file forms and present documents, including independent assessments and comps—which are the assessed values of similar homes in your area.
6. Avoid Value-Increasing Improvements to Your Home
If you want to avoid increasing your property value—and thus your property tax—in the future, you could avoid home improvements that increase the value of your home. This is obviously a personal decision, and you’ll need to weigh the value of the improvement to your lifestyle with any potential increase in property tax before making a decision.
Don’t Forget Other Financial Matters
While you’re doing the work to manage your property taxes, it’s a good idea to take some time to review other financial matters. For example, make sure you know how homeownership is impacting your other tax obligations. And keep an eye on your credit score so you know where you stand should you choose to buy a new home or need a short-term loan to cover a surprise property tax bill.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.
If you find yourself owing taxes after your tax filing is done, you may be wondering how you’re going to pay them. While there are several options—from savings to getting a loan—many people wonder if it’s possible to put their tax bill on a credit card. Maybe even someone else’s credit card. Learn how paying for your taxes with a credit card works and how to choose the best method for your situation.
In This Piece
Can You Pay Your Taxes with a Credit Card?
Yes, it’s possible to pay your taxes with a credit card. Several IRS-approved payment processors, including Pay1040.com, PayUSAtax.com, and OfficialPayments.com, allow credit card payments for tax bills. Tax preparers sometimes link to these processors so you can use them to pay your tax bill once the tax professional is done filing your taxes.
Can You Pay Your Taxes with Someone Else’s Credit Card?
As long as you’re authorized to use someone else’s credit card to pay your taxes, you can do so. The tax processors don’t require that the credit card name match the filer, so if you have a family member or friend who’s willing to let you use their credit card to pay your taxes, you can do so.
Can You Pay Someone Else’s Taxes with Your Credit Card?
You can also use your credit card to pay someone else’s tax bill, but that person’s Social Security number must be used when the payment is made to the account.
Can You Pay Your Taxes with Someone Else’s Bank Account?
It’s possible to pay your taxes with a payment directly from your bank account. You can do this through the Electronic Federal Tax Payment System. You’ll need your information to verify your identity as well as the routing number and account number for the account you’re paying from. As long as the account owner allows it, you can use someone else’s bank account to pay your taxes, and vice versa.
How Tax Payments Appear on Your Card Statement
When you pay your tax bill with a credit card, the transaction is listed as United States Treasury Tax Payment or something similar on your credit card statement. And the processing fee you pay the payment processor is usually listed as a Tax Payment Convenience Fee or something similar.
How Long Does It Take for the IRS to Post Your Payment?
Your payment is processed immediately—at least by the next business day—and the payment date is the date the payment is authorized. While the payment is processed almost immediately, it can still take five to seven days for the IRS to post the payment to your tax account.
Can You Use More Than One Card for a Tax Payment?
You can use two different credit cards to make your payment. You do need to complete two separate transactions, though—one for each card. You’ll also receive a different confirmation number for each transaction. If you need to make a partial payment on your credit card rather than a full amount, you can do this as well.
How to Pay Taxes with a Credit Card
Here are the basic steps for paying your taxes with a credit card:
File your taxes, either through a tax service or on your own, by the deadline. Keep an eye on the IRS website as the COVID-19 pandemic has changed some deadlines in the past.
Go to the Electronic Federal Tax Payment System website.
Select the Pay by Debit or Credit Card option.
Select your preferred processor, making sure to note the fees.
Follow the prompts to verify your identity and make the payment.
If you use a tax preparation service you may be directed to pay your taxes through the software, but the process should be generally the same. You’ll be made aware of any fees or processing charges, and you’ll then enter in your info and the credit card numbers to make the payment. These services are also a good idea if you’re not sure what deductions and exemptions you qualify for or if you want to make sure you’re getting the biggest refund possible.
Pros and Cons of Paying Your Taxes with a Credit Card
Before you pay your taxes—or someone else’s—with a credit card, it’s important to be aware of both the benefits and drawbacks.
Pros
One of the biggest pros of paying by credit card is that it’s convenient and easy. If you happen to have a credit card that offers frequent flyer miles or pays cash back, you might also benefit from charging a transaction like an income tax bill, potentially earning yourself points toward a free vacation or your next cashback bonus.
Depending on how much you owe in taxes and how long it takes you to pay the IRS, you may save money—in the form of avoiding IRS late penalties and interest fees—by paying the bill immediately with a credit card. That’s assuming those fees and penalties don’t outpace the APR on your credit card, of course.
Cons
All payment processors charge a processing fee to let you pay your taxes with a credit card. For the 2021 tax season, processing fees range from 1.87% to 1.98% of your tax bill or a minimum fee of $2.50 to $2.69, whichever is higher. ACI Payments, Inc., charges 1.98% or a $2.50 flat fee. PayUSAtax.com charges 1.96% or a minimum $2.69 fee. And Pay1040 charges 1.87% or a minimum $2.50 fee. Tax preparation software usually charges similar fees.
If you pay with your credit card and don’t pay off your credit card bill the month after you pay, you’ll pay interest. This means you can end up paying interest twice what you paid for the processing fee in added interest charges on your credit card bill. The numbers can be even higher if you pay only the minimum balance due each month.
Choose the Best Credit Card to Pay Your Taxes
If it takes you a few months or more to pay off the credit card balance after you use it to charge your tax bill, make sure you choose the best credit card available to you. Choose your credit card with the lowest interest rate. Using a card with a 0% introductory interest rate and paying your full tax bill before the introductory period ends is ideal, because this allows you to avoid paying interest on your tax bill.
Upgrade Triple Cash Rewards Visa®
$200 bonus after opening a Rewards Checking Plus account and making 3 debit card transactions*
Unlimited cash back on payments: 3% on Home, Auto, and Health categories and 1% on everything else after you make payments on your purchases
No annual fee
Combine the flexibility of a credit card with the predictability of a personal loan
No touch payments with contactless technology built in
See if you qualify in minutes without hurting your credit score
Great for large purchases with predictable payments you can budget for
Mobile app to access your account anytime, anywhere
Enjoy peace of mind with $0 Fraud liability
*To qualify for the welcome bonus, you must open and fund a new Rewards Checking Plus account through Upgrade and make 3 qualifying debit card transactions from your Rewards Checking Plus account within 60 days of the date the Rewards Checking Plus account is opened. If you have previously opened a checking account through Upgrade or do not open a Rewards Checking Plus account as part of this application process, you are not eligible for this welcome bonus offer. Your Upgrade Card and Rewards Checking Plus account must be open and in good standing to receive a bonus. To qualify, debit card transactions must have settled and exclude ATM transactions. Please refer to the applicable Upgrade VISA® Debit Card Agreement and Disclosures for more information. Welcome bonus offers cannot be combined, substituted, or applied retroactively. The bonus will be applied to your Rewards Checking Plus account as a one-time payout credit within 60 days after meeting the conditions.
You may be tempted to reach for a rewards credit card to pay your tax bill, because the rewards, such as a cashback offer, will help to offset the processing fee you pay. Before you pull out a rewards card to pay your tax bill, though, take a close look at the card’s interest rate and calculate how long it’ll take to pay the bill in full. Carrying a big balance on a rewards card with a high interest rate may not be worth the rewards you earn.
Will Paying My Taxes with a Credit Card Affect My Credit Score?
Paying your tax bill with a credit card can affect your credit score depending on your tax bill compared to your total available credit limit. Using a credit card to pay your taxes can result in a higher credit utilization rate, which can negatively impact your credit score. The ideal limit for your credit utilization ratio is under 30% of your available credit. If you go above these limits, it could negatively affect your score.
Whether you choose to use a credit card to pay your taxes or not, it’s a good idea to keep an eye on your credit report. Services like ExtraCredit® can do all the legwork for you so you always know what your credit score is and how your financial decisions are impacting it.
Other Options for Paying Your Taxes
If your tax bill is so large that you can’t pay it off quickly or you don’t have a credit card with a low or 0% APR, there are better alternatives. Choosing another option to pay your tax bill is a good idea if it helps you avoid paying interest on a credit card balance on top of an already sizable tax bill.
The IRS has payment plans for taxpayers who meet certain criteria. An installment can reduce, or eliminate altogether, penalties and interest. It’s worth your time to consider this option, especially if you’re already financially strapped. Learn more on the IRS payment plan and installment agreement page.
If you’ve ever had to repair your credit, you know how much of a struggle removing inaccuracies from your reports can be. The bad news is that in many cases, after removing negative accounts from your credit history you may only see a slight increase or maybe even no change at all to your credit score.
Why? Because you need a healthy credit profile to have a healthy credit score. If all you have is negative items on your credit reports and you’ve removed them all, you might not have much of a report left to build a credit score with.
One of the easiest ways to build a good credit score is to improve your credit utilization ratio. You can do this by expanding the total amount of credit available to you by applying for a new credit card.
If you’re currently working with a low credit score right now, and are worried about being approved for a credit card, we’ve got you covered. Here’s our top 4 easy approval cards.
Best Overall Card: Chime
Secured Chime Credit Builder Visa® Credit Card
Qualifying direct deposit of $200 or more. Checking account required.
No annual fee. No minimum* security deposit. No credit check to appy
*Money added to Credit Builder will be held in a secured account as collateral for your Credit Builder Visa card, which means you can spend up to this amount on your card. This is money you can use to pay off your charges at the end of every month.
Build credit history with your own money on everyday purchases
View and track your FICO® Score right in the Chime app. FICO Scores are used by 90% of top lenders*
Chime is a financial technology company, not a bank. Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Credit Builder Visa® Card is issued by Stride Bank, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted.
If you’re ready to start building your credit history, we suggest Chime as a simple, easy way to start. Unlike most other secured cards, Chime does not require a minimum security deposit to get started.*
So if you don’t have a large chunk of cash to put down up front, you can put down however much you’re able to afford. That amount becomes your credit limit, so you can start building up your limit over time.
Even better – they also don’t have a minimum credit score required to get started! In fact, they don’t run a credit check at all, so you don’t have to worry about a hard credit pull popping up on your report.
*Note: To apply for Credit Builder, you must have received a single qualifying direct deposit of $200 or more to your Checking Account.
Other Recommended Secured Credit Cards
Most secured credit cards require the user to put down a cash deposit to secure their line of credit, which makes them a great option for people looking to build up their credit with on-time payments. Here are a few other secured cards we’d recommend.
Combined credit builder account and secured card products to help you build credit and save* money (minus interest and fees) No credit check.
No credit check. No credit history required.
Start with a credit builder account that reports to all 3 credit bureaus. Each on-time monthly payment builds credit history and savings. Choose the plan that works for you.
Make at least 3 monthly payments on time, have $100 or more in savings progress in your account, and be in good standing* You’ll automatically be eligible for the Self Visa® Credit Card, without a credit check.
Your savings progress from your Credit Builder Account acts as your refundable security deposit.
The Self Visa® Credit Card is accepted at millions of locations in the U.S.
Stay on track with credit utilization monitoring, auto pay, account reminders, a mobile app, and dedicated customer support.
*Sample Product for Credit Builder Account: $48 monthly payment, 12 month term with a $9 admin fee at a 15.92% Annual Percentage Rate. Please refer to www.self.inc/pricing for the most recent pricing options.
**Disclaimers, Rates and Fees: https://www.self.inc/card-agreement and https://www.self.inc/terms-of-service
We like the Self – Credit Builder Account + Secured Visa® Credit Card combo because it uses your progress on your credit-builder loan to approve you for a credit card, allowing you to side-step a credit inquiry to qualify for your card.
OpenSky Secured Visa
OpenSky® Secured Visa® Credit Card
No credit check to apply and find out instantly if you are approved
OpenSky gives everyone an opportunity to improve their credit with an 85% average approval rate for the past 5 years
Get considered for a credit line increase after 6 months, with no additional deposit required
You could be eligible for the OpenSky Gold Unsecured Card after as few as 6 months
Reports to all 3 major credit bureaus monthly, unlike a prepaid or debit card. Easy application, apply in less than 5 minutes right from your mobile device
View your FICO® Score through your OpenSky account, an easy way to stay on top of your credit
Nearly half of OpenSky cardholders who make on-time payments improve their FICO score 30+ points in the first 3 months
Your refundable* deposit, as low as $200, becomes your OpenSky Visa credit limit
Offer flexible payment due dates which allow you to choose any available due date that fits your payment schedule
*View the cardholder agreement
We like OpenSky Secured Visa because there is no credit check required to apply, and you can request an extension on your credit line after six months. Unlike most other secured cards, OpenSky also allows you to fund your security deposit in payments, making it even easier to get started.
Best Balance Transfer Card: UNITY® Visa Secured Credit Card – The Comeback Card™
UNITY® Visa Secured Credit Card – The Comeback Card™
Unlike your Prepaid Card, UNITY Visa secured card can help you build your credit. Apply online in less than 5 minutes, and you could be approved today!
No Minimum Credit Score required; low fixed interest rate of 17.99%; Fully refundable FDIC security deposit* required at time of application; if you have a min of $250 to deposit immediately, you can start now!
No application fee or penalty rate
Monthly reporting to all 3 major credit bureaus
24/7 online access to your account
*See the Cardholder Agreement for more details.
We like this card because not only does it report your on-time payments to all three credit bureaus (helping you build up those positive credit signals) but it also offers a promotional rate for balance transfers of 9.95% for six months. Considering how difficult it can be to find a good balance transfer card with an easier application process, we especially recommend this card if your goal is to rearrange your credit card debt.
Building (and Protecting) Your Credit
While your score may not be strong enough to allow you apply for credit cards that offer better cashback or rewards, there are many credit cards in our list above that offer at least some of those same benefits and provide more support for reporting your good credit behavior to the bureaus.
Just as a reminder, payment history can be the heaviest factor when it comes to calculating your credit score. Although you may want to improve your score by applying for a new credit card, make sure that you can avoid any late payments that may hit your reports and jeopardize all your hard work.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
There are many ways to improve your credit score fast, like checking the accuracy of your credit reports, fixing late payments, becoming an authorized user, and much more. Each method can add points to your current credit score.
Having a bad credit score can make it difficult to navigate life, and it can also cost you quite a bit of extra money. A low credit score can increase your interest rates for credit cards and loans and may also require you to put down larger deposits when renting a home or turning on services. However, a good credit score gives you more options for where you can live and the loans you can get. Plus, it can save you money in the long run, which is a win-win for most.
Here, we provide you with 11 different ways that might help you improve your credit score faster. Not only will these methods help you improve your credit score, but they’ll also help you maintain a healthy score in the future.
In This Piece:
Check the Accuracy of Your Credit Reports
Target the Areas You Need to Improve
Fix Your Late Payments
Get Added as an Authorized User
Clear Any Outstanding Collection Accounts
Open a Secured Credit Card
Dispute Credit Inquiries
Be Mindful of Your Credit Utilization
Increase Your Credit Limits
Set Up Automatic Payments
Have Your Utilities Reported
1. Check the Accuracy of Your Credit Reports
The first step in improving your credit score is to be aware of what’s on your credit history. There are three major credit bureaus, Experian®, Equifax®, and TransUnion®, and each has its own credit report and score based on your credit history. That means everyone actually has multiple credit scores.
Sometimes, you may find errors on your report that you’ll need to correct through a dispute process. If you find an error, you’ll have to file a separate dispute with each credit bureau since they’re run separately. If there are multiple errors on your credit reports, you’ll need to dispute each of those individually. You might consider working with a credit repair company to make things a little easier for yourself.
Due to derogatory marks having such a big impact on your credit score, removing errors can be one of the fastest ways to build your credit score.
2. Target the Areas You Need to Improve
Checking your credit reports from each of the three main credit reporting agencies is easy. Under the Fair Credit Reporting Act, you have the right to obtain a free copy of all three credit reports once each year. The government mandates that you can receive one free credit report each year, and you can easily access it at AnnualCreditReport.com. You can also check your credit through our free credit report card, which provides a snapshot of your credit and a letter grade for each of the factors that drive your score.
Once you receive a copy of your credit report, you will know which areas need improvement and where to start.
3. Fix Your Late Payments
Late and missed payments can stay on your credit report for seven years. These derogatory marks lower your credit score and make you appear as a bigger risk to lenders.
The credit reporting agencies don’t remove these items, but you may be able to talk a creditor into doing so. Creditors can forgive one late payment if you have a history of on-time payments and you call to discuss it with them. Removing repeated delinquencies may require a little more effort on your part.
4. Get Added as an Authorized User
You can become an authorized user for a credit card account if you have a friend or family member with a good credit history. Even if you don’t use the credit card, your credit reports will reflect the person’s credit history of on-time payments.
This is also known as “piggybacking” on someone’s credit. Should you do this, it’s important to remember that the other person and yourself are now linked. This means that using the card and missing payments can harm the other person’s credit score and vice versa.
5. Clear Any Outstanding Collection Accounts
Contacting your creditors about paying off your debt is a great way to raise your credit score fast. Make sure that they agree to remove the negative hit to your credit report if you repay it in full—and get it in writing. If this agreement isn’t made, there will likely be no impact to your credit.
After making an agreement with the collections company, request a pay for delete letter to have it removed from your credit report. A pay for delete letter is an agreement in writing stating that the creditor will have the derogatory information removed from your report.
6. Open a Secured Credit Card
Having and using a credit card can help you build credit, but it’s difficult to get approved for a credit card when you have a low credit score, which is where secured credit cards become useful. Unlike a typical unsecured credit card, where you are given a credit line based on your credit alone, you can open a secured credit card by depositing money, which becomes your credit limit.
For example, if you deposit $500, you will then have a $500 line of credit. Banks are more likely to approve you for a secured credit card because it’s less of a risk. Your payments on this card are reported to the credit bureaus, and if you make those payments on time, this can help you raise your credit score.
7. Dispute Credit Inquiries
Many credit inquiries are hard inquiries, and hard inquiries impact your credit score. In fact, a hard inquiry stays on your credit report for an entire year. While each individual hit is relatively small, it can push you over the edge from one credit score tier to one below it. What’s more, several hard inquiries over a short period of time can drop your score by a lot.
Like any other negative factor on your credit report, you can dispute credit inquiries. If you didn’t approve the inquiry into your credit, you may be able to get it removed. This could potentially increase your credit score, but only slightly.
8. Be Mindful of Your Credit Utilization
If you carry a large amount of debt compared to your available credit, your score can suffer. In fact, credit utilization accounts for 30% of your credit score. So, if your total credit card available credit is $10,000, and you’re currently using $8,000 of it, paying down those balances can increase your score.
Keeping your utilization rate at around 30% is recommended. That’s $3,000 in debt on a $10,000 available limit, for example.
9. Increase Your Credit Limits
As discussed above, a low utilization rate is ideal, and one way to improve your credit utilization is by increasing your credit limits. Using the $10,000 example, $4,000 of debt would be a 40% credit utilization ratio. If you increase your credit limit to $15,000, that same $4,000 of debt would only be 26%. But be aware, this could trigger an inquiry and that will impact your score as well.
10. Set Up Automatic Payments
Having a good payment history is one of the best ways to improve your credit score because your payment history accounts for 35% of your FICO score. One of the simplest ways to do this is to set up automatic payments. Simply go to your credit card company’s website, make an account, and set up automatic payments for the minimum each month.
This way, you never have to worry about forgetting your payment. You can also make additional payments during the month if you plan on paying more than the minimum.
11. Have Your Utilities Reported
Typically, your utilities are not reported to the credit bureaus, and not many people realize this. Each month, it’d be great to get positive payment history on your credit score for making these payments on time. You can do this by taking an extra step to have your utilities reported through different services. For example, Credit.com offers this as part of our ExtraCredit® service.
How Your Credit Score Is Calculated
When working on improving your credit score, it’s helpful to know how your score is calculated so you know which factors are the most important. You can then make a plan for where you should start. Here are the major credit scoring factors and how each one can impact your credit score:
Payment history: A history of overdue and missed payments may signal that you are a bigger risk to creditors. Thus, this factor has the greatest negative effect on your credit score. This makes up about 35% of your credit score.
Amount of debt: Debt is 30% of your FICO Score and also weighs heavily on other credit scoring models. This is also known as your “credit utilization,” and ideally, you want to keep it below 30% of your max credit limit.
Age of accounts: Creditors like to see a proven record of borrowing, utilizing, and repaying credit. If you’re new to credit and borrowing, there isn’t a lot of data to go on. This makes up 15% of your score.
Account mix: Making 10% of your score, lenders want to make sure you can handle both revolving and installment credit. This means credit cards that you continue to use after repaying and loans that are closed upon full repayment.
History of credit applications: Multiple hard inquiries on your credit may look like you are overextending yourself financially and appear desperate. This will lower your score. Credit inquiries make up 10% of your score.
How Long Does It Take to Fix Your Credit Score?
Most people want to fix their credit score as quickly as possible, but the length of time often depends on your situation. If you have multiple derogatory marks on your credit report, it may take months or even years for them to drop from your report. When trying to fix your credit score, it’s most beneficial to start with methods you can control, like making your payments on time, disputing errors, and trying to settle your debts with collection agencies.
FAQs
Below, we’ve answered some of the most common questions people have about how to quickly improve their credit score.
Checking Your Credit Report Is the First Step Toward Improving Your Credit Score
Your credit report is the best place to start if you want to improve your credit score. Your credit report will show you your account balances, any derogatory marks you may have, and hard credit inquiries. This will help you see where to start, and you can also find out if there are any errors on your credit report.
To get an idea of where you stand with your credit, sign up for Credit.com’s free credit report card today.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
A cashier’s check is a guaranteed payment method issued by a bank on behalf of an account holder. It ensures the funds are available and provides added security against fraud or insufficient funds.
If you’re about to spend a significant sum of money—say for a down payment on a new car or your closing costs on your first house—there’s a chance you’ll be required to provide a cashier’s check.
If you’ve never heard of or used a cashier’s check, you may wonder why you can’t just write a check from your personal checking account to handle the transaction. After all, they’ve already approved you for this transaction, so what gives?
In this comprehensive guide, we’ll explore the concept of a cashier’s check, its importance in different situations, how to obtain one, associated costs, alternatives, and much more. Let’s dig in.
In This Piece:
What Is a Cashier’s Check?
Why Would I Need a Cashier’s Check?
Pros and Cons of Cashier’s Checks
Where to Get a Cashier’s Check
How to Get a Cashier’s Check
How Much Does a Cashier’s Check Cost?
Can I Buy a Cashier’s Check with My Credit Card?
How Long Is a Cashier’s Check Good For?
Cashier’s Check Alternatives
Cashier’s Check vs. Money Order vs. Certified Check
What Happens If I Lose My Cashier’s Check?
What Is a Cashier’s Check?
A cashier’s check is a check written by your bank or another bank on your behalf and is guaranteed by the bank. It offers the advantage of guaranteed funds and additional security features, making it a preferred choice for large transactions. Unlike personal checks, you cannot return cashier’s checks for insufficient funds.
How does the cashier’s check work? First, the bank removes the funds from your account or accepts cash or a personal check. The bank then writes a check for the same amount to the recipient of your choice. The bank typically charges a small fee for providing a cashier’s check. These checks also have extra security features, like watermarks, color-shifting ink, and security thread, that make them difficult to counterfeit or commit fraud against and protect personal information.
Why Would I Need a Cashier’s Check?
Cashier’s checks are essential in many situations where guaranteed funds are required. For example, when making a large purchase, such as a car or a house, sellers often prefer cashier’s checks to ensure the payment is valid and secure. Cashier’s checks are also commonly used in real estate transactions, debt settlements, and other scenarios where trust and security are essential.
Pros and Cons of Cashier’s Checks
Cashier checks offer several advantages, including guaranteed funds, increased security, and broader acceptance. They are widely recognized and trusted by institutions. However, there are also some drawbacks to consider, such as associated fees and the need to visit a bank in person to obtain one.
Let’s look at the pros and cons of cashier’s checks.
Pros of Cashier’s Checks:
Guaranteed funds: Offer more assurance than personal checks since the bank backs them. The funds are guaranteed, ensuring that the recipient will receive the payment.
Enhanced security: Typically come with additional security features, such as watermarks, holograms, or special paper, making them difficult to counterfeit, which provides an added layer of protection against fraud.
Widely received: Commonly accepted by individuals, businesses, and institutions, preferably for transactions involving large amounts of money, such as real estate purchases or vehicle sales.
Faster processing: Usually processed more quickly than personal checks since they are already verified and guaranteed by the bank. This can be beneficial when time is of the essence in completing a transaction.
Record of payment: They provide a clear paper trail and proof of payment, which can be useful for record-keeping purposes or in case of any disputes or legal matters.
Cons of Cashier’s Checks:
Cost: One of the main drawbacks of cashier’s checks is the associated cost. Banks typically charge a fee for issuing a cashier’s check, ranging from a few dollars to a percentage of the check amount. This fee adds to the overall expense of the transaction.
Inconvenience: Obtaining a cashier’s check may require visiting the bank during business hours, which can be inconvenient, especially if the bank is not easily accessible. This can be a drawback for individuals who prefer more convenient digital payment methods.
Loss: Like any physical document, it can be lost or stolen. If a cashier’s check goes missing, replacing it can be time-consuming and may involve additional fees or requirements from the issuing bank.
Limitation: While cashier’s checks are suitable for large transactions, they may limit the maximum amount you can write on them. This can be a disadvantage if you need to make a payment exceeding the limit set by the issuing bank.
Inflexible: Once a cashier’s check is issued, it is generally non-negotiable. Unlike personal checks, they cannot be canceled or modified. This lack of flexibility can be a disadvantage if any changes or adjustments need to be made to the payment after the check is issued.
Considering these pros and cons is essential when deciding whether to use a cashier’s check for a specific transaction. Assess your needs, the transaction’s requirements, and the associated costs to make an informed decision.
Where to Get a Cashier’s Check
Obtaining a cashier’s check is relatively straightforward. Nearly every banking institution offers this service. You can inquire with your bank whether you can request a cashier’s check by phone or if you need to visit your local branch.
Generally, you can purchase a cashier’s check directly from a branch office. Inform the teller of the desired amount, and they will confirm the availability of funds in your account. The check amount may be frozen in your account until it clears or withdrawn immediately.
How to Get a Cashier’s Check
Typically, obtaining a cashier’s check requires you to physically go to the bank. You’ll also need to show your ID and give them the name of the person or company to whom you want to write a check. Some banks may also require a payee address or phone number, so either call ahead to confirm or have that information on hand before going to the banks.
Follow these steps and tips to get a cashier’s check:
Contact your bank and gather the required documents
Start by contacting your bank to inquire about their process for obtaining a cashier’s check. You can call their customer service or visit the bank’s website to find out if they offer cashier’s checks and if you need to visit a branch in person.
In most cases, you’ll need to go to your local bank branch to purchase a cashier’s check. Bringing all the necessary documents and information with you is a good idea to make the process smoother.
When you arrive at the bank branch, approach the teller and tell them you need a cashier’s check. Provide them with the recipient’s name and the amount you want the check to be issued.
Confirm sufficient funds and pay the required fee
The teller will verify that you have sufficient funds in your account to cover the amount of the cashier’s check. They may ask you to deposit the necessary funds into your account if you haven’t already done so.
A fee is usually associated with obtaining a cashier’s check, which varies from bank to bank. The teller will inform you of the fee amount and request payment. Be prepared to pay the fee in cash or deduct it from your account.
In some cases, the teller may ask for additional information, such as the purpose of the cashier’s check or any special instructions you have for the recipient. Provide these details as requested.
Receive the cashier’s check
Once you complete all the necessary steps, the teller will generate the cashier’s check. Double-check the details on the check, including the recipient’s name, the amount, and any additional information.
Keeping the receipt is recommendable. The teller may provide you with a receipt for the transaction. Keeping this receipt for your records is essential, as it serves as proof of purchase and can be helpful if any issues arise.
The specific steps and requirements for obtaining a cashier’s check may vary slightly depending on the bank or financial institution you’re dealing with. It’s always a good idea to check with your bank for their specific process and any additional instructions they may have.
Remember, having all the necessary documents, identification, and funds is crucial to ensure a smooth and hassle-free experience when obtaining a cashier’s check.
How Much Does a Cashier’s Check Cost?
The cost of a cashier’s check varies from tens of dollars to a percentage of the check amount, depending on the bank. Typically, banks charge a small fee for providing this service. It is advisable to check with your bank beforehand to understand the exact cost of obtaining a cashier’s check.
Can I Buy a Cashier’s Check with My Credit Card?
Typically, you can’t buy a cashier’s check directly with a credit card. However, suppose you don’t have sufficient funds in your checking or savings account. Then, you can consider taking a cash advance on your credit card, depositing those funds into your bank account, and purchasing a cashier’s check.
Remember that cash advances often come with higher-than-usual interest rates, so promptly paying off the balance is essential to avoid accruing excessive interest.
How Long Is a Cashier’s Check Good For?
Cashier’s checks typically do not expire, but the issuing bank may have its policies regarding the validity period. As previously noted, checking with your bank for specific procedures, like how long their cashier’s checks are valid, is always a good idea.
Cashier’s Check Alternatives
What if you can’t get a cashier’s check? If obtaining a cashier’s check is not feasible for your situation, alternative payment methods are available. Here’s a list of alternative approaches:
Money orders are prepaid instruments issued by various organizations such as post offices, banks, and retail stores.
Certified checks are personal checks verified and guaranteed by the issuing bank. The bank sets aside the funds in the account and ensures that the check will clear when presented for payment.
Wire transfers allow you to transfer funds from one bank account to another electronically. You can use this method for larger transactions and international transfers.
Online payment services, such as PayPal, Venmo, and Zelle, offer a convenient way to send money electronically. These services allow you to transfer funds directly from your bank account or credit card to the recipient.
Electronic Funds Transfer (EFT) is a secure and efficient way to transfer funds between bank accounts. You can use it for recurring payments, such as direct deposits or automatic bill payments.
Personal checks are a good alternative, especially for smaller transactions. However, they may not provide the same level of assurance to the recipient since they rely on the funds being available in the payer’s account.
Cash may be an acceptable alternative for smaller amounts and transactions between trusted parties.
Remember, it’s essential to assess the specific requirements of your transaction and consider the level of security and acceptance needed before choosing an alternative to a cashier’s check.
Cashier’s Check vs. Money Order vs. Certified Check
Money orders and certified checks are the alternatives to cashier’s checks with more similarities and popularity. They are constantly compared to each other and often bring confusion due to their resemblances. Let’s look at how they compare so you can make informed decisions in the future.
Money orders have typically limited funds, often up to only a few thousand dollars. On the other hand, cashier’s checks can be written for larger sums, making them suitable for high-value transactions. Additionally, cashier’s checks provide an added layer of security as a specific bank guarantees them.
Certified checks are personal checks the bank has verified, marking them “certified.” Cashier’s checks, on the other hand, are written by the bank on your behalf. Both checks offer a guaranteed level, but cashier’s checks are often preferred for more significant transactions due to their wider acceptance and added security.
What Happens If I Lose My Cashier’s Check?
If you lose your cashier’s check before it gets to its rightful recipient, the issuing bank could require that you be bonded for the amount of the lost check before they cut another. This bond, known as an indemnity bond, essentially means that you are liable for the replacement check.
In conclusion, cashier’s checks are a reliable and secure payment method for various transactions. Their guaranteed funds and additional security features provide peace of mind to both buyers and sellers. If you need to make a large payment, consider obtaining a cashier’s check from your bank to ensure a smooth and trustworthy transaction.
For more information on how cashier’s checks work or if you need help finding the right credit card to improve your financial well-being, contact experts.