If you purchase a CD on a credit card, is that considered a cash advance?
Question:
Get a CD yielding 5% monthly 7 month (TD)
Would you get charged by the CC for a cash advance or would it be treated as a "purchase" of a security?
Answer:
Probably, it would depend on the card issuer. But I don't know that any bank would open a CD by directly charging your CC. They would most likely require you take a cash advance, then actually use cash to open it. Too much risk for them if you decide 2 1/2 months later to dispute the charge.
It is a cash equivalent, not a merchandise purchase.
Yes, I would say that is a cash advance. However, I seriously doubt that any financial institution would sell you a CD on a credit card. this could too easily lead to a form of "check Kiting' which is illegal.
But look at it another way, why would you want to? You pay at least 9 or 10% on the credit card advance loan, and earn 5-6% on the CD. So, to begin with, you lose about 5% on the transaction. And then you have to pay State and Federal Income taxes on the interest you earned. Even with no state income tax, you would still pay a minimum of 15% federal tax. You can't make any money that way.
It will be treated as a cash advance, there is no merchant paying the CC company a fee for a purchase.
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