How to Purchase A Cd With A Credit Card

Using a credit card to purchase a Certificate of Deposit (CD) can be a strategic financial move. This guide outlines the general process to help you navigate it successfully.

1. Verify Issuer Policies: Before proceeding, confirm that the financial institution issuing the CD accepts credit cards for funding. Not all banks or credit unions permit this, and some may treat the transaction as a cash advance, which often incurs high fees and interest rates.
2. Choose the Right Card: Select a card that maximizes your benefits for this specific purchase. Look for cards with rewards on all spending or those with a 0% introductory APR on purchases. You can use Kudo's explore cards tool to compare options and find a suitable match for your financial goals.
3. Understand the Terms: Carefully review the terms for both the CD and your credit card. Pay close attention to potential cash advance fees, your card's standard purchase APR, and the CD's early withdrawal penalties to ensure the investment remains profitable.
4. Complete the Transaction: Once you have clarified the policies and selected your card, you can complete the purchase through the financial institution’s online portal or in person, following their specific instructions for funding a new CD account.
5. Plan Your Repayment: To capitalize on the benefits, create a solid plan to pay off the credit card balance before any promotional interest periods expire. This prevents high-interest debt from eroding the returns earned from your CD.

Impact On Your Credit Score

Using a credit card to purchase a Certificate of Deposit (CD) can influence your credit score in a few key ways. Here are some factors to consider before proceeding.

• Credit Utilization. This purchase increases your credit card balance, which can raise your credit utilization ratio. A higher ratio may negatively impact your credit score, so it's important to monitor your usage.
• Hard Inquiry. Some financial institutions may perform a hard inquiry on your credit report when you open a CD. This can cause a temporary, minor dip in your overall credit score.
• Payment History. Making timely payments on the credit card used for the CD is crucial for your credit health. Consistent, on-time payments can positively influence your credit history and score over time.

Alternative Ways To Purchase A Cd

Funding Without a Credit Card

Most financial institutions let you fund a new CD directly from a checking or savings account, bypassing credit cards. You can initiate an internal transfer online or via a mobile app. For funds at another bank, an electronic ACH transfer is a common method. Some traditional banks also accept a personal check or wire transfer to open the account, offering further flexibility.

Adjusting CD Settings

You can also customize your CD's behavior at maturity. A key setting is automatic renewal, which you can disable to have funds transferred to a linked account when the term ends. Additionally, you often have choices for interest disbursement. You can either have interest compounded within the CD for maximum growth or paid out periodically to a separate account for income.

Choose the Right Card to Purchase A Cd

Using the right credit card for a large purchase like a CD can make a significant difference in your rewards or interest payments. With nearly 3,000 cards in its database, Kudos’ AI-powered Explore Tool helps you find the ideal fit for your financial goals. You can compare cards side-by-side based on your personal preferences, from cashback rates to annual fees. Explore all cards to ensure you're making the smartest choice.

For those looking to get more out of their credit cards, Kudos is the ultimate free tool for online shopping. We're currently offering $20 back after your first eligible purchase—just sign-up for free with code “GET20” and make a purchase at a Boost merchant.

Frequently Asked Questions

What information is needed to buy a CD with a credit card?

You will need your credit card number, expiration date, CVV security code, and the associated billing address.

Are there extra fees for using a credit card for a CD?

Some banks may charge a processing or convenience fee, so it's wise to confirm with your institution beforehand.

Can I earn credit card rewards on a CD purchase?

It depends on your card issuer, as some may classify the transaction as a cash advance, which won't earn rewards.