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.

A debit card is a plastic card which provides an alternative payment method to cash when making purchases. Physically the card is an ISO 7810 card like a credit card; however, its functionality is more similar to writing a cheque as the funds are withdrawn directly from either the cardholder's bank account (often referred to as a check card), or from the remaining balance on a gift card.

Depending on the store or merchant, the customer may swipe or insert their card into the terminal, or they may hand it to the merchant who will do so. The transaction is authorized and processed and the customer verifies the transaction either by entering a PIN or, occasionally, by signing a sales receipt.

In some countries the debit card is multipurpose, acting as the ATM card for withdrawing cash and as a check guarantee card. Merchants can also offer "cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with their purchase.

The use of debit cards has become wide-spread in many countries and has overtaken the check, and in some instances cash transactions by volume. Like credit cards, debit cards are used widely for telephone and Internet purchases. This^{[citation needed]} may cause inconvenient delays at peak shopping times (e.g. the last shopping day before Christmas), caused when the volume of transactions overloads the bank networks.