Why Consumers Use Credit Cards To Pay Taxes-It’s Not What You Think!
What consumers want consumers get; even the IRS isn’t immune to this basic rule of consumerism that drives marketplace evolution. When it comes to payments and transactions, today’s consumer wants convenience, speed, real-time information and flawless, secure execution. Not surprisingly, these profound changes in consumer lifestyle have taxpayers increasingly demanding the speed and convenience of card-based payments, instant proof of payment and the potential for rewards points or miles from a card issuer.
Personal finance pundits have been quick to counsel consumers against making tax payments with their credit card if they can’t pay the bill when their statement arrives. Market data reveals consumers took that message to heart. Does this mean services like PAY1040.com, which enables consumers to use their American Express, Discover, MasterCard or Visa card to make a federal tax payment, haven’t been embraced by taxpayers? Hardly. Transaction volume at PAY1040.com has grown by impressive margins every year of the site’s existence. Clearly, taxpayers have embraced the concept of using plastic, but short-term financing has little to do with their decision. So what does?
LINK2GOV-an IRS-authorized payment provider, Metavante company and the operator of PAY1040.com-has the answer: convenience. To arrive at this conclusion, LINK2GOV surveyed 28,000 taxpayers who used PAY1040.com. When asked /why they used the service/, 87.2% of participants responded that it was convenient and easy to use and/or they were running out of time. Only 2.76% of respondents indicated they ignored the advice of personal finance advisors, using the service for short term financing. As for meeting taxpayers’ demands for speed and convenience, 84.45% responded that they were likely to use PAY1040.com again.
Hopkins can provide you with a detailed overview of LINK2GOV’s study of PAY1040.com users, including why taxpayers use the system and the conveniences provided. He can also share with you his expectations on how using credit and debit cards for making tax payments will continue to grow for years to come.
Quenching the IRS’s Thirst for ePayments
While Americans have become well acquainted with the IRS’s preference for eFiling, they may not be aware the IRS has an equally strong interest in ePayments. In fact, for a variety of cost-saving reasons, the IRS has focused on eliminating as much paper as possible. Metavante, principally through its LINK2GOV company, has supported this mission by acquiring card-based electronic transactions for the IRS.
Though LINK2GOV isn’t the longest tenured IRS payments partner, in 2007 it acquired more than half of all federal tax payments initiated with credit and debit cards. LINK2GOV technology innovations and willingness to co-brand its service to deliver additional marketing muscle have enabled LINK2GOV to generate additional electronic transactions for the IRS at a compounded annual transaction growth rate of nearly 65% since entering into its IRS relationship in 2003.
Hopkins can provide insight into how technology advancements such as “incometaxpayment.com” “electronified” additional federal tax payments by making PINless debit a payment option. Additionally, Hopkins can describe how LINK2GOV’s rollout of “Licensed Tax Centers” not only created additional opportunity to make card-based payments to the IRS, but also increased taxpayer awareness of the card option by leveraging the marketing power of nationally known financial institutions and tax preparation services.
Using Your Credit Card to Pay Your Taxes? What do you want? A Reward?
More taxpayers are using credit cards (and debit cards) than ever. Since the IRS first looked to transaction acquirers such as Metavante’s LINK2GOV to enable acceptance of card-based tax payments, every subsequent year has delivered increased consumer adoption of this option.
While convenience and the speed of card-based payments play significant roles in this trend, they aren’t the only reasons. Just as consumers have grown fond of the rewards points attached to credit (and in some cases debit) card transactions for everyday purchases, the same stimulus exists for federal tax payments. The lure of rewards points for federal tax payments may be enhanced given the size of some tax bills and the practice of some credit card issuers to offer bonus rewards points specifically for initiating payments to the IRS.
Whether it’s cash back, gifts or frequent flier miles, more and more consumers are tying rewards to credit card transactions that may not be typical. A recent study of taxpayers who used LINK2GOV to make their tax payments showed that credit card rewards was the number two reason (after convenience) for using a card to initiate a federal tax payment with a payment card.
With more consumers becoming rewards-oriented, Hopkins can discuss the benefits of using your credit card to pay your taxes as long as you can pay the balance and avoid financing charges, and why this trend is likely to increase in this year’s tax season.
Metavante Technologies, Inc. (NYSE: MV) is the parent company of Metavante Corporation. Metavante Corporation delivers banking and payments technologies to over 8,600 financial services firms and businesses worldwide. Metavante products and services drive account processing for deposit, loan and trust systems, image-based and conventional check processing, electronic funds transfer, consumer healthcare payments, electronic presentment and payment, business transformation services, and payment network solutions including the NYCE Network, a leading ATM/PIN debit network and provider of mobile financial services. Metavante (www.metavante.com) is headquartered in Milwaukee.