Paying Taxes By Credit Card Off To A Slow Start

New York, NY - American taxpayers have been slow to embrace the option to pay Uncle Sam with their credit cards, according to a study of 1,000 American adults conducted by leading market research firm Ipsos-Insight. The study reveals that while 63% of American adults are aware that the Internal Revenue Service accepts credit cards, only 1% plan to use a credit card to pay incremental Federal income taxes the next time they owe. "The barrier to broader use is clearly the large convenience fees being charged directly to the taxpayer for this service," said Greg Mahon, Senior Vice President with Ipsos-Insight's Financial Services practice. Depending on the service provider, a credit card convenience fee of anywhere from 2.25% to 3% is charged to the taxpayer when paying federal taxes by credit card. The Taxpayer Relief Act of 1997 authorized the Treasury to accept credit card payments for federal taxes but prohibits the IRS from paying the standard credit card transaction fees merchant usually pay credit card companies to process their transactions. Mahon added: "In an effort to broaden taxpayers' payment options, the government had to agree to allow credit card payment service providers to charge a convenience fee to taxpayers. The convenience fee acts as a necessary revenue stream and is split between the service provider and the credit card company in exchange for the time it takes them to handle and process these transactions. While the government has succeeded in making more payment options available to taxpayers, the heavy convenience fee being charged to consumers outweighs the other benefits of using a credit card, such as rewards points or payment deferral." According to the study, Americans are extremely resistant to paying the convenience fees. Three out of four (76%) say they "definitely will not" use a credit card the next time they owe incremental Federal income taxes. Instead, they will resort to the usual personal check (70%), money order (12%) or direct debit from bank account (9%). The study reveals that if the service were free, 34% of taxpayers would use it, sending the signal that the convenience and loyalty benefits of using a credit card are appealing, just not for a premium. "Most consumers are looking for ways to trim $100 here and there from their tax bill, not add $100," continued Mahon. This year, 15% of Americans expect to pony up an average of $3,000 to Uncle Sam on April 15--an attractive sum to credit card companies. "But with only 1% looking to use the service, there does seem to be some question about the long term viability of this offering," added Mahon. "As a matter of fact, Visa still considers their participation a pilot test. They may very well decide to pull out of the program if consumer demand remains low or if they believe the convenience fees charged ultimately denigrate the Visa brand via customer dissatisfaction." "To make this work, the IRS--together with the credit card companies--needs to come up with a plan that significantly reduces the convenience fees charged to taxpayers. Our research indicates a significant number of taxpayers would use this service if the fees charged to them were 1% or less. If the IRS decides they want broader usage of this payment option, they will need to find a way to pay the card companies a processing fee, just like the millions of other merchants worldwide," concluded Mahon. Methodology Data were gathered using the Ipsos U.S. Express from March 29 - 31, 2004. Interviews were conducted via telephone among a nationally representative U.S. sample of 1,000 adults age 18 and older. The margin of error is +/- 3.1%. For more information, please contact: Dan Maceluch Vice-President, Corporate Communications Ipsos-Insight 604.257.3200 About Ipsos-Insight Ipsos-Insight, the flagship marketing research division of Ipsos in the U.S., specializes in research for companies in the following industries: agrifood; cable, media and entertainment; consumer packaged goods; energy and utilities; financial services; health; lottery and gaming; retail; and technology and communications. Ipsos-Insight provides custom and tracking research services to domestic clients, as well as U.S.-based multinationals. It offers concept and product testing, package testing, attitude and usage studies, omnibuses, tracking systems, brand equity, volume forecasting, marketing models, advanced analytics, and global research. Ipsos-Insight is an Ipsos company, a leading global survey-based market research group. To learn more, visit: www.ipsos-insight.com. About Ipsos Ipsos is a leading global survey-based market research company, owned and managed by research professionals. Ipsos helps interpret, simulate, and anticipate the needs and reactions of consumers, customers, and citizens around the world. Member companies assess market potential and interpret market trends. They develop and build brands. They help clients build long-term relationships with their customers. They test advertising and study audience responses to various media. They measure public opinion around the globe. Ipsos member companies offer expertise in advertising, customer loyalty, marketing, media, and public affairs research, as well as forecasting and modeling and consulting. Ipsos has a full line of custom, syndicated, omnibus, panel, and online research products and services, guided by industry experts and bolstered by advanced analytics and methodologies. The company was founded in 1975 and has been publicly traded since 1999. 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