American Express allowing rewards customers to pay taxes with points

American Express announced Monday that it’s going to allow its Membership Rewards customers to pay their federal and some state and local income taxes using membership rewards points.

When the reward transaction goes through one of Amex’s preferred tax payment processors — either Pay1040 or Official Payments Corp. — the processor charges a 2.35% “convenience” fee. So, your American Express account will be charged for $5,117.50, then Amex will immediately credit the charge using points. You won’t get additional points for this exchange.

As a general rule, every 100 points is worth $1 on a gift card. Other kinds of reward exchanges are not as favorable, including this deal with tax payment processors Pay1040 or Official Payments Corp., where paying $1 to the IRS requires 200 Membership Rewards Points. At that rate, in order to pay off your $5,000 tax bill plus the “convenience charge,” you would need to have 1,023,500 Membership Rewards Points.

Read the full story at Walletpop.com:

http://www.walletpop.com/blog

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