Use a low-rate credit card to open a CD? Banks don't allow it.
Q: Is there a way that I can buy a certificate of deposit with a credit card? The card would have 0 percent APR for 12 months.
M.W., via e-mail
A: Credit-card issuers get very creative with 0 percent offers, but Shawn Jacobson, a certified financial planner in Minneapolis, says he has yet to find a bank that will accept a credit card to open a CD.
Some credit-card offers include so-called "convenience checks" that charge no interest for a limited time before the rate bumps up. In theory, you could open a bank account with one of these checks. But the interest rate charged for this check can far exceed the interest earned on a CD if you don't quickly pay off the loan, warns Mr. Jacobson.
Convenience checks are generally intended for paying off higher interest-rate credit-card and loan balances. Before using such a check, read the fine print. Make sure you understand when and how long the 0 percent rate applies. Even if the APR is 0 percent, convenience checks typically carry transaction fees of 2 to 3 percent of the amount written, up to a maximum of $50 or $75. That alone could bust your CD scheme.
Q: My husband recently left his job with a company where he had earned approximately $18,000 in its profit-sharing plan. We will find out in July exactly how much there is and how long we have to roll it over into a "qualified plan" to avoid adverse tax consequences. We may have to roll it over in 30 to 60 days. In this instance, what is a "qualified plan?" My husband has a Roth IRA. Could we put the profit-sharing money into the IRA?
M.C., Santa Fe, N.M.
A: First, your husband needs to read the profit-sharing plan document to determine how much of those profit- sharing contributions he keeps, says Brian T. Jones, a certified financial planner in Fairfax, Va.
Companies sometimes punish short-term employees who leave before they are fully vested in the company's contributions, he says.
Example: Assume a company has a laddered five-year vesting schedule, meaning its contributions vest at the
rate of 20 percent each year until
they reach 100 percent. If an employee is there for three years, he could keep 60 percent of any company contributions, while the remaining 40 percent of the company's share goes back into the plan. (The employee's contributions always belong to him.)
A "qualified plan" is what Mr. Jones calls business jargon for an IRA or other retirement plan that qualifies for favorable tax treatment. In this case, your husband should be able to roll over his profit- sharing plan into a traditional IRA.
Note, though, that it isn't possible to move the profit-sharing plan directly into a Roth IRA. And unless he elects to do a direct custodian-to-custodian transfer, he has 60 days to accomplish the task or the money is considered a distribution and may be subject to a 10 percent early-distribution penalty in addition to ordinary income taxes.