Can you buy stocks with a credit card?

Please note: the author and BestCreditCard.com accepts no responsibility for the financial decisions taken as a result of reading this, or any other article.

The short answer is yes, however, whether this is a good idea is another question.

If I can do it, why shouldn’t I?

Buying stocks comes with the risk of losing your investment- always. The consequences of losing borrowed funds, such as money on your credit card, can be serious.

You may not be able to repay

Buying stocks includes a calculated risk. If you cannot afford the amount you invest today (i.e. it is borrowed from your credit card company), the likelihood is you will just end up amounting more high interest on your balance than you may gain from your stock portfolio. 

If you do lose money on your investment, if you face more money owed in credit card fees on the balance as a result of late or missed payments, your credit score will take a significant hit. 

Average credit card interest floats around 16% APR or higher. Average stock returns are understood to be around seven to ten percent, for less volatile, long-term investments. 

Our advice is to assess the risks beforehand, invest what you can afford, and most importantly, do not get carried away with volatile market swings. 

Risks of fraud

Many reputable investment firms do not allow customers to fund stock investments using credit cards. The Security and Exchange Commission warns that sellers who do pressure you into using a credit card are most likely to use the money for scams or fraud. 

If you do choose to use your credit card for investments, keep an eye on your account transactions carefully. 

What are my other options?

Choose a credit card that invests rewards on your behalf

Some credit cards offer the option to deposit spending-based rewards, such as cashback, air miles or points, into an investment account on your behalf. For example, the Fidelity Rewards Visa Signature Card offers two percent cashback on all purchases which can be opted to be deposited immediately into an eligible Fidelity account. 

Use your cashback for investments

If you receive cashback rewards from your card, request it in the form of a check or straight deposit. You can then use this to fund your investments using a brokerage account. 

The final take

Stocks can be a great way to make money. But they are risky. It is important to invest responsibly. It is wiser to use alternative forms of spending to fund investment decisions than a credit card.