Fund an IRA with a credit card?

trant3 — Wed, 10 Feb 2016 00:27:38 GMT

So I have $5500 to contribute to an IRA for 2015 tax year which will allow me to receive some extra $$ back from taxes. Curious to know though if I can fund the account, somehow, with a credit card to earn cashback or meet spending limits, then pay it off.

Re: Fund an IRA with a credit card?

Anonymous — Wed, 10 Feb 2016 01:10:09 GMT

afaik you cannot use a credit card as a funding source. You can send $1000/mo free with Amazon Payments through a credit card and the person you send it to can deposit it into a bank account. You can also fund a Google Wallet account with a credit card for a 2.9% fee and deposit it into your bank?

looking at your scores limits, etc and getting a general idea of your profile, your time would be better spent elsewhere.

Re: Fund an IRA with a credit card?

JSS3 — Wed, 10 Feb 2016 01:29:28 GMT

Google Wallet and Amazon payments stopped those services.

Re: Fund an IRA with a credit card?

Anonymous — Wed, 10 Feb 2016 01:32:12 GMT

@JSS3 wrote:
Google Wallet and Amazon payments stopped those services.

good to know, thanks

Re: Fund an IRA with a credit card?

Kevin86475391 — Wed, 10 Feb 2016 01:34:58 GMT

@trant3 wrote:
So I have $5500 to contribute to an IRA for 2015 tax year which will allow me to receive some extra $$ back from taxes. Curious to know though if I can fund the account, somehow, with a credit card to earn cashback or meet spending limits, then pay it off.

I wouldn't advise this. First things first though, do you already have the $5,500 in a checking or savings account ready to go, and are just looking for a way to earn rewards?

If not, then financially there's no way you're going to be better off paying CC APR on that just to receive a small tax break. The way the tax break on a traditional IRA works is that the $5,500 reduces your taxable income, but simply not paying taxes on $5,500 isn't going to outweigh credit card interest. Of course ideally the bigger point would be that you'd also be investing in your retirement...but even then assuming an 8% return on your investment, credit card debt just isn't worth it.

However, even if you DO have the $5,500 already and are just looking for a reward-earning vehicle to deposit it, this still seems like a dangerous idea. I think there's a good chance that depending on how you do it the money would be coded as a cash advance and would carry very high fees, start accruing interest as soon as it's charged (no grace period), and may be at a higher APR than regular purchases. Again, I doubt you'd make more in rewards than you'd pay in fees and interest. If you do have the $5,500 by all means, definitely invest in an IRA for your future, but going through a credit card likely isn't the best route.

Finally, depending on your age, you may be much better off saving in a Roth IRA rather than a traditional IRA. Roth IRAs are NOT tax deductible now, so you wouldn't see the benefit you're talking about in your original post. However, instead Roth IRAs are tax free when you withdraw money (whereas withdrawls from a traditional IRA, even after age 59.5 ARE taxed). Unless you're already near retirement age, Roths are often a much better deal. That's because the earnings you make on your investment will quite outweight short-term taxes. So for example you're much better off paying taxes on and depositing $5,500 in a Roth now and later withdrawing the $5,500 plus earnings (which depending on performance and time horizon can be HUGE) tax free later.

Anyway, best of luck with whatever you decide, but to reiterate, I would advise extreme caution with this approach and make sure you fully understand any and all fees and interest you may owe if you do it.

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