Lincoln is an investor and content marketer. He has worked for financial advisors, institutional investors, and a publicly-traded fintech company. Lincoln holds degrees in Finance, Economics, and Accounting.
Can you buy stocks with a credit card?
Yes, but I wouldn’t.
Buying stocks with a credit card is expensive, risky, and puts your credit at risk.
Plus, you could pay extra fees that, together, wind up being greater than your potential returns! After all, the average credit card APR is above 17% and over 5% higher than the S&P 500’s average annualized return (11.88%).
Not to mention, if you buy stocks with a credit card, you expose yourself to scams and fraud.
Most brokerages won’t even let you do it in the first place.
If you don’t have any cash available there are still a few methods to fund your investment account (skip ahead to the Alternatives to Investing With a Credit Card section below). Keep in mind that many investing apps offer free shares just for signing up.
Yet, if you desperately want to buy stocks with a credit card, there are a few ways to do it.
How to Buy Stocks With a Credit Card
If you’re wondering can I buy stocks with a credit card, yes, you can. But should you? As you’ll find below, the cons pretty strongly outweigh the pros, and you’ll have to be a bit creative and/or use a specific broker. Let’s dig in:
If you’re looking for ways to fund your investment account, consider investing your spare change with Acorns.
The platform’s Round-Ups feature allows you to round up everyday purchases and deposit the rounded-up amount into your investment account. In a way, it’s a method of indirectly investing in stocks with your card, because those rounded-up amounts will be invested in a mix of stocks and bonds.
You probably won’t miss $0.50 here and there during the course of everyday life, but it can start to add up over time. Plus, as an added bonus, you can get a $20 bonus when you set up your first recurring investment if you use the link below.
Here’s how you can buy stocks with a credit card:
1. Stockpile Gift Card
First, rather than buying stocks with a credit card, you can use your card to purchase a gift card from a brokerage like Stockpile then use the gift card to deposit money into your brokerage account.
It’s an extra step, but the end result is still the same.
Stockpile offers gift cards ranging from $1 to $2,000 for buying stocks. However, they also charge $0.99 to $2.99 fees, plus a 3% debit or credit card fee per gift card.
If you load $2,000 onto one of their gift cards, you’ll have paid more than $60 in fees.
2. Balance Transfer
A balance transfer is one way to fund a brokerage account indirectly through your credit card.
Some credit card issuers allow you to transfer your balance into your checking account. If you have a $5,000 credit limit, you could transfer $2,000 into your checking account then transfer that money into your brokerage account.
However, typical balance transfer fees can range from 3%-5%. Your transferred balance will also immediately accrue interest unless your card has a 0% APR on balance transfers.
3. Get a Cash Advance
Another way to buy stocks with a credit card is to use your card to get a cash advance.
Yet cash advance fees range from 3%-% and have a higher APR than standard purchase rates and balance transfer fees. Cash advances also accrue interest right away.
Benefits of Buying Stocks With a Credit Card
While the cons far outweigh the pros, there are a few benefits in buying stocks with a credit card.
1. Speed
Credit card payments often process instantaneously compared to 1-3 business days for ACH and domestic bank wires and at least 7 business days for checks.
Additionally, with a credit card, you can withdraw funds immediately, and those funds will appear on your card within 1-3 business days.
However, you’ll pay a fee of at least 1-3% for that speed/convenience.
2. Trading On Margin…Without Trading On Margin
A “margin account” is a brokerage account in which you trade stocks with borrowed funds from your broker while using your account as collateral.
Buying stocks using a credit card works similarly. With a credit card, you have the leverage to invest in stocks with more money than available.
That said, I would not recommend trading on margin.
3. Small Minimums
When you use a credit card to buy stocks, you can start with a small minimum and buy fractional shares.
This is true of small bank deposits, too.
Check out how to invest $1,000 before you pull the trigger on any specific investments.
Risks of Buying Stocks With a Credit Card
The risks of buying stocks with a credit card far outweigh the rewards.
Here are the 3 main reasons why:
1. Investment Fees
Buying stocks with a credit card comes with fees that will instantly put your investments in the negative.
For instance, we already mentioned the gift card fees from Stockpile and the 3-5% fees plus immediate interest accrual from balance transfers or cash advances.
However, those fees don’t even include the potential for late payment fees, interest fees, commissions, and more.
You will need to earn handsome returns, and fast, for it to pay off.
2. Borrowing Money You Cannot Repay
No matter how you invest your money, you’re taking a risk. But, if you invest with money you don’t have, you’re being reckless.
If you invest this way with a credit card, you could get caught in a quagmire of stock losses, credit card fees, and higher interest charges. Not to mention, massive debt and an irreparably damaged credit score.
It can quickly spiral out of control.
3. Fraud Risks
Can you buy stocks with a credit card? Reputable brokers will not allow it, which makes it easy to spot stock scams.
If someone asks for a large “minimum” investment and pressures you into using your card, it’s likely a scam.
4 Alternatives to Investing With a Credit Card:
No money to contribute to your investment account? No problem.
These 4 alternatives will help you buy stocks with a credit card the right way:
1. Use an Investment App
Investment apps like Robinhood, Webull, Stash, and Acorns are strong alternatives to directly buying stocks with your credit card. They are secure brokerages and have come up with some creative solutions that allow you to use your card to make deposits.
For instance, Acorns has a program called Found Money.
You link your card to your Acorns account, and Acorns will reward you with bonus cash to invest with when you shop at one of their partners.
2. Round Up Your Change
Speaking of Acorns, the platform also offers a “round up” feature. It allows you to link a debit card to your account. When you make purchases using this card, the purchase amount will be rounded up to the next dollar, then periodically is “rounded up” balance will be transferred to your investment account. So, for instance, if you buy a coffee for $3.25, $0.75 will be “rounded up” and transferred to your Acorns account. It’s amazing how quickly these small amounts can add up and give your portfolio a boost. For example, below you’ll see the Round-Ups I’ve accumulated in my own Acorns account in the past few months, just from rounding up everyday purchases. That’s $120 that I might not have otherwise invested, so I see it as a win!
3. Use a Credit Card that Invests Rewards
Consider using a card that deposits rewards into an investment account rather than offering cash-back rewards, points, or miles.
Cards like the Fidelity Rewards Visa Signature Card, Upromise MasterCard, and American Express Schwab Investor Card are excellent options.
4. Invest Your Cash Back Rewards
If you have a credit card with cash back rewards, consider using these rewards to start investing.
Some brokerages also have sign-up bonuses when you open a new account, so you can fund your account with your cash back rewards then collect the extra bonus.
5. Use a High-Yield Savings Account Instead
If you’re considering buying stocks with a credit card, you might want to open a high-yield savings account instead.
High-yield savings accounts are FDIC-insured and practically risk-free. Yet they still offer solid returns.
For example, if you start a high-yield savings account at CIT Bank, you could earn interest that accrues fast.
Final Word: Can You Buy Stocks with a Credit Card?
The ease, speed, and potential to invest with a line of credit seem attractive. However, the risks of investing with a credit card far outweigh the rewards.
The stock market is risky enough today without adding on the layer of investing with borrowed credit card funds. As mentioned above, if your investments turn sour the ill effects can spiral.
The combination of investment fees, fraud, and scams, and borrowing money you cannot repay is a recipe for disaster.
If you’re thinking about investing in stocks with a credit card, I urge you to use an alternative solution.
FAQs:
Can I use my credit card to invest in stocks?
You can use your credit card to invest in stocks, but you probably shouldn’t.
When you use your credit card to invest in stocks, you risk dealing with mounting investing fees, borrowing money you can’t repay, and fraud.
Can you buy stocks with a credit card on Robinhood?
No, you cannot buy stocks with a credit card on Robinhood.
But you can link a non-Robinhood Visa or Mastercard debit card to your account and make instant transfers.
What apps can you buy stocks on a credit card?
No apps let you directly buy stocks using a credit card.
The closest thing you can do is to buy Stockpile gift cards ranging from $1 to $2,000 and use those to buy stocks.
Does buying stock hurt your credit?
No, buying stocks does not hurt your credit.
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