Self directed Individual 401 k: Are credit cards allowed?
The self directed individual 401 k gives plan owners flexibility and control. One of the perks is that plan owners can have a checking account under the Solo 401k plan name. To fund an investment or pay for any investment expenses, plan owner can simply write a check. This is very helpful for real estate investors, who often need to pay for property management, maintenance, and other expenses.
But is it possible for a Solo 401k plan to have a credit card? Many plan participants bring up this question as a credit card can prove helpful for many transactions. In this Solo 401k Quick Tip video, Sense Financial discusses the self directed individual 401k plan and credit card:
Self directed Individual 401 k: Are credit cards allowed?
Technically there is no rule that prohibits the Solo 401k plan from having a credit card. However, a credit card can only be issued to a person or entity with a credit history. To offer a credit card to your self directed individual 401 k plan, the bank may require you, the plan owner, to sign the guarantee.
As a disqualified person, you are not allowed to extend any credit to the plan. So in short, you cannot have a credit card with your Solo 401k plan. This would be considered a Prohibited Transaction and your plan will be deemed disqualified.