10 worst ways to pay your tax bill

The bumper sticker is true: The IRS does have what it takes to take what you've got. But don't be in such a panic to pay the tax collector that you make an unwise payment decision.

Frantic taxpayers too often come up with imprudent ways to raise tax cash, especially when the April deadline is looming and the Internal Revenue Service bill is relatively small. But even a small amount can quickly balloon if exorbitant interest rates -- or other strings -- are attached.

Before you make a tax-payment mistake, check out these 10 worst ways to pay Uncle Sam.

10. Get a cash advance against your paycheck.

The Federal Trade Commission warns that the typical annual percentage rate of interest on payday loans is 391 percent. That means if you borrow $300 and fail to pay it back in two months' worth of paydays, you'll owe $495. Maybe a big spender like you can afford that. But most of us can't.

9. Get a cash advance on your credit card.

Fees for cash advances vary, but most issuers charge you a 3 or 4 percent upfront fee (or a minimum of $20) plus an interest rate of between 20 percent and 25 percent. According to Bankrate's minimum payment calculator, if you pay the least possible each month on a $300 advance at 20 percent interest, it will take you 42 months to be rid of your credit card debt. In that time, you will pay just over $119 in interest, plus the $20 that you paid upfront for a total of $439. And that, of course, presumes you don't charge another cent to that card. If you have to resort to this and you've been a good credit card customer, you can try asking for a lower interest rate.

8. Pawn your diamond ring.

You'll probably have trouble getting as much as $300 for anything short of the Hope diamond, but if you're successful, expect to pay for the privilege. Hocking possessions to raise quick cash is such a time-honored business that virtually every state has similar and fairly tough regulations holding interest to 3 percent a month or 36 percent a year, plus a 20-percent upfront service charge. Twelve months is usually the maximum length of the loan. So if you borrow $300, pay the upfront fee and the carrying charges every month for a year, it'll cost you $468 to get your ring back. If you don't pay, kiss the ring goodbye.

7. Take out a personal loan.

The rates on unsecured personal loans can be ugly, but not as ugly as some other fast-cash options. If you happen to have a credit union available to you, try that first because the rate is usually at least 2 percentage points lower.

6. Charge your tax bill.

As the April deadline approaches, the pay-with-plastic option begins to look like the answer. But you'll be charged a "convenience fee" of about 2.5 percent based on the amount charged. Don't be confused by the word convenience. It isn't for your convenience. It's for the convenience of the credit card company because the IRS won't cover the merchant fees. With an interest rate of 15 percent and minimum monthly payments, Bankrate's calculator figures it will take you 38 months to discharge a $300 tax debt. Your total bill will come to a relatively modest total of about $378, as long as you don't use the card again until the tax balance is paid.

5. Use your home equity.

If you have a home equity line of credit, it will allow you to borrow against it usually by just writing a check. Interest rates on equity accounts are attractive and if you pay what you owe quickly, this debt will cost less than putting the same amount on your credit card. But if interest rates head up, so will equity line rates. And by using this payment method, your home is the collateral for even the relatively small amount you used to pay your tax bill.