By Jay MacDonald • Bankrate.com

Nobody enjoys paying taxes, but several credit card issuers hope to lessen the pain by offering reward points or airline miles for cardholders who pay their federal income tax with plastic. Some credit card issuers like American Express and Discover offer cash back when you use their plastic to pay off Uncle Sam.

American Express offers one Membership Rewards point for nearly every dollar you charge for your taxes. Charge your taxes on a Chase United Mileage Plus Visa and you'll rack up more points and miles. But not everyone is happy with the "convenience" of paying taxes with plastic.

Beware the convenience fee
Bear in mind that if you charge your tax bill on these cards, you will be charged a convenience fee -- usually 2.49 percent of the tax amount paid -- by either Official Payments Corp. or Link2Gov, the two third-party processors licensed by the federal government to accept credit card payments.

There are ways to save on the convenience fee, though. Link2Gov has a flat rate of $2.95 when you charge your taxes on a bank-issued debit card with the MasterCard or Visa logo. This even beats writing a check and mailing it, when you consider the U.S. Postal Service price of $4.50 for Certified Mail, with a Return Receipt. Debit cards eligible for use at incometaxpayment.com must participate in at least one of the following payment networks: NYCE, Star or PULSE. You can tell if your debit card is eligible by looking for the network logo on the back of a check, debit or ATM card.

American Express won't rebate your convenience fee, but it will allow you to redeem Membership Reward points to pay for it. Figure on cashing in 200 reward points for every dollar you're charged for the convenience of paying your tax bill with plastic, according to spokeswoman Monica Beaupre.

Cards overtake EFTs
Credit or debit card payments to the IRS have grown steadily since Uncle Sam first began accepting plastic in 1999 and now outnumber electronic funds transfers, or EFTs. That number is expected to grow considerably in 2008 when businesses will be allowed to pay by card as well. The advent of electronic filing and the proliferation of tax software programs, many of which offer their own rebate incentives for paying online, are driving the trend. There's also the simple convenience of telling the taxman to charge it.

Have you ever stood behind someone in line at the store and watched him shuffle through a stack of what must be at least 10 credit cards? Consumers with this many cards are still in the minority, but experts say that the majority of U.S. citizens have at least one credit card -- and usually two or three. It's true that credit cards have become important sources of identification -- if you want to rent a car, for example, you really need a major credit card. And used wisely, a credit card can provide convenience and allow you to make purchases with nearly a month to pay for them before finance charges kick in.

That sounds good, in theory. But in reality, many consumers are unable to take advantage of these benefits because they carry a balance on their credit card from month to month, paying finance charges that can go up to a whopping 23 percent. Many find it hard to resist using the old "plastic" for impulse purchases or buying things they really can't afford. The numbers are striking: In 1999, American consumers charged about $1.2 trillion on their general-purpose credit cards.

In this article we'll look at the credit card -- how it works both financially and technically -- and we'll offer tips on how to shop for a credit card. (Experts say this should be a project on the scale of shopping for a car loan or mortgage!) We'll also describe the different credit-card plans available, talk about your credit history and how that might affect your card options, and discuss how to avoid credit-card fraud -- both online and in the real world.

Let's start at the beginning. A credit card is a thin plastic card, usually 3-1/8 inches by 2-1/8 inches in size, that contains identification information such as a signature or picture, and authorizes the person named on it to charge purchases or services to his account -- charges for which he will be billed periodically. Today, the information on the card is read by automated teller machines (ATMs), store readers, and bank and Internet computers.

According to Encyclopedia Britannica, the use of credit cards originated in the United States during the 1920s, when individual companies, such as hotel chains and oil companies, began issuing them to customers for purchases made at those businesses. This use increased significantly after World War II.

The first universal credit card -- one that could be used at a variety of stores and businesses -- was introduced by Diners Club, Inc., in 1950. With this system, the credit-card company charged cardholders an annual fee and billed them on a monthly or yearly basis. Another major universal card -- "Don't leave home without it!" -- was established in 1958 by the American Express company.

Later came the bank credit-card system. Under this plan, the bank credits the account of the merchant as sales slips are received (this means merchants are paid quickly -- something they love!) and assembles charges to be billed to the cardholder at the end of the billing period. The cardholder, in turn, pays the bank either the entire balance or in monthly installments with interest (sometimes called carrying charges).

The first national bank plan was BankAmericard, which was started on a statewide basis in 1959 by the Bank of America in California. This system was licensed in other states starting in 1966, and was renamed Visa in 1976.

NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses.

The company's common stock trades on the New York Stock Exchange under the ticker symbolDow Jones Industrial Average and is ranked as the 74^th largest company by Fortune. In 2007, BusinessWeek and Interbrand ranked American Express as the 15^th most valuable brand in the world, estimating the brand to be worth US$20.87 billion.^[1] "AXP." It is one of the 30 stocks that comprise the

The current CEO is Kenneth Chenault, who took over in 2001.

Early history

American Express was founded in 1850, in Buffalo, New York, as a joint stock corporation that was a merger of the express mail companies owned by Henry Wells (Wells & Company), William Fargo (Livingston, Fargo & Company), and John Butterfield (Butterfield, Wasson & Company), as an express business.^{[citation needed]} American Express first established its headquarters in a building at the intersection of Jay Street and Hudson Street in the TriBeCa section of Manhattan, and enjoyed a virtual monopoly on the movement of express shipments (Goods, Securities, Currency, etc.) throughout New York State. In 1874, American Express moved its headquarters to 65 Broadway in what was becoming the Financial District of Manhattan, a location it was to retain through two buildings^[2].