How to Transfer a Credit Card Line of Credit to a CD

Transferring a line of credit on a credit card to a CD or other investment tool is as easy as any other balance transfer. Keep in mind, however, that many credit card companies have rules against using money from a line of credit for this purpose. It's not illegal, but credit card companies reserve the right to charge full interest and levy penalties on account holders caught doing so.

Things You'll Need

• Bank or brokerage from which to buy the CD

Instructions

1. Read the rules and regulations very carefully. Even if your cardholder agreement permits buying investments, the low interest specials often apply only to purchases and/or balance transfers from other credit lines.

2. Put the money in your checking account. In some cases this is a simple electronic transfer. In others, your credit card company will send you convenience checks, which you then make out to yourself and deposit. Some companies will send a physical check for the amount requested, which you must then deposit.

3. Buy the CD from your bank or brokerage. This usually just involves asking a teller or personal banker to sell you a CD. Complete the paperwork, transfer the funds and you're finished.

4. Make certain the terms of the CD are congruent with the terms of your low interest deal. In other words, don't buy a one year CD if your 0% offer only lasts 9 months.

Tips & Warnings

• Be sure to run the numbers very carefully. CDs usually pay interest far below that charged by credit lines. A profit is usually possible only by taking advantage of super-low interest specials, and there are often very specific rules about maintaining the lower interest rate. If you break those rules (even with a late payment), you're stuck paying a high interest rate while the money remains unreachable in the CD.