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28 Jan 2010

Free Money: January update and tax planning Money

Capital One sent me some "payment checks" which give a grace period just like a credit card charge, so I deposited a couple in my savings account to collect the interest.

Earlier this month I paid my bill electronically the day before the due date, and once I saw it had posted on their site, I wrote myself another check and deposited it in the bank. Payment and deposit posted at the bank on the same day, so I'm earning my 1.35% APY uninterrupted. When this month's bill arrived, there were three more payment checks in the envelope with it, and in the same day's mail was a little booklet with three more, just in case. I guess they really want to lend me money at 0% interest.

In the meantime, I've been pondering how to best pay my taxes. Since I'm self-employed my income varies a lot from year to year, and this year I'll have a large payment due in April. I could write them a check, but what fun would that be?

You can pay your taxes with plastic through three providers who have arrangements with the IRS. Since the IRS won't pay a merchant fee, they all charge extra. If you use a credit card, they charge 1.95% or 2.35%, much more than any plausible card rebate. But if you pay with a debit card, there's a flat fee of about $4. One bank I use now offers reward points on debit card payments. It's not a lot, one point per $2 with a point being worth about a penny, but a payment of $800 would earn more than $4 of points, and my tax bill will be considerably more than that. Hmmn.

posted at: 01:13 :: permanent link to this entry :: 2 comments
posted at: 01:13 :: permanent link to this entry :: 2 comments

comments...        (Jump to the end to add your own comment)

I get it, but you'd be better off just depositing the $20,000 in a money market account, a very good savings account, or even a CD. Capital One Direct Banking has an APY of 1.55%.

Of course, neither of these approaches will beat inflation except for rare periods like November 2008 through October 2009.

(by Daniel Quinlan 30 Jan 2010 15:49)

Um, I did put the $20K in a money market account. That's the whole point of the exercise. I'm getting 1.35% at HSBC. There is some small print on the back of the checks which suggests that C1 wouldn't let me deposit a C1 loan check into a C1 bank account.

(by John L 30 Jan 2010 17:13)

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