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Card firms say pay tax via plastic
Paper reports that promotions are urging the use of credit and debit cards when settling up with the gov't.

NEW YORK (CNNMoney.com) - Credit card firms are offering a variety of rewards to entice people to pay their taxes with plastic this season, according to a report published Monday.

Chase and United Airlines are awarding double miles for each dollar of taxes paid on their United Mileage Plus SignatureVisa card, and American Express is offering a similar deal on its Delta and Starwood credit cards, USA Today said.

Consumers may be attracted to the incentives, but fees and high interest rates could outweigh the rewards, the newspaper said.

Paying taxes by credit cards incurs a fee -- usually 2.49 percent of federal or state taxes paid -- and some credit card companies charge interest rates as high as 30 percent if you don't pay off your monthly credit card bill, the report said.

"Using your credit card when you can pay some other way is never a good idea," David Jones, president of the Association of Independent Consumer Credit Counseling Agencies, told the newspaper.

More people already charge their federal taxes to credit or debit cards than have the money electronically transferred from their bank accounts, USA Today said.

That number is growing, too. About 1.5 million taxpayers paid their federal taxes by credit or debit card last year, up 54 percent from 2004, the newspaper said.

"From a security standpoint, some people believe (credit cards) are the better way to go," Kathleen Fiorello, a vice president at American Express, said in the report.

All of the promotions offered by credit card issuers this tax season carry restrictions, according to USA Today. For instance, points earned on the Starwood Preferred Guest card only apply to transactions made between March 1 and April 17, while the United deal only applies if your account isn't overdue.

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