Credit Card 2 Can You Buy Stocks With a Credit Card

Can You Buy Stocks with a Credit Card? The Answer Is Yes

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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).

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 you’ll have to be a bit creative and/or use a specific broker.

None of these are particularly good options, but they are options. Read the Risks of Buying Stocks With a Credit Card section below to find out why.

Here’s how you can buy stocks with a credit card:

Credit card can you 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.

These 3 options for buying stocks with credit card aren’t good for one reason: If you don’t have the money to deposit into your investment account, you probably won’t have the money to pay off your credit card bill when it comes due.

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.

Credit card 2 can you buy 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.

Bad credit can you buy stocks with a credit card

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.

Acorns credit cards

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. 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.

3. 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.

4. 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, a minimum deposit of $100 can net you a guaranteed 3.25% rate.

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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About the author

Bobby Samuels

Contributor

After receiving stock options from the hi-tech firm he was working at and not knowing what that meant, Bobby knew it was time to get educated on finance. He then leveraged his newfound passion into a Master’s in Finance from Harvard University and has since worked for a diverse client base including CEOs, CFAs, private equity executives, venture capitalists, global investment firms, real estate agencies, marketing agencies, and publications.