Can You Buy Stocks With A Credit Card — And Should You? | Bankrate (2024)

FAQs

Can You Buy Stocks With A Credit Card — And Should You? | Bankrate? ›

Therefore, it is illegal to purchase stocks using a credit card. Although it is technically not possible to pay for stocks using credit cards, any illegitimate transaction may lead to legal consequences. Furthermore, credit cards in general provide unsecured loans.

You should invest your savings, not your borrowings. Credit cards can also negatively impact your credit score, so they're best avoided whenever possible. The bottom line is that borrowing cash to invest in stocks is always too risky, as the stock market is volatile.

However, using a credit card to do so could put you at risk for fraud, hurt your credit and end up costing you more than you could earn in returns. Most reputable firms won't allow it, and taking the risk could have some unpleasant consequences.

Purchase a Commodity: Investments need not be in the form of a stock or bond. Things like jewelry, collectibles (e.g. stamps or baseball cards) or artwork may also qualify. And since you may be able to purchase such items directly with plastic, this would certainly qualify as investing with a credit card.

Bottom line. Can you buy stocks with a debit card? You sure can. Just make sure you're not overdrafting your checking account to fund your brokerage account—and that you're not trading on margin, especially if you already have high-interest debt.

Like other forms of investments, buying or selling stocks won't directly change your credit score, but they can indirectly affect it. However, there is an exception — margin accounts.

The absolute and risk-adjusted returns of credit funds typically improve total portfolio risk metrics. Credit usually has lower price volatility, but note that some credit investments are not priced daily, which can artificially lower their volatility.

Technically, yes. You can lose all your money in stocks or any other investment that has some degree of risk. However, this is rare. Even if you only hold one stock that does very poorly, you'll usually retain some residual value.

Can You End Up in Debt If a Stock Goes Down? In a standard cash account, you can't end up in debt if a stock goes down. However, if you're trading on margin, that's a different story. Margin accounts can lead to debt if you're not careful.

Buying on margin is borrowing money from a broker in order to purchase stock. You can think of it as a loan from your brokerage. Margin trading allows you to buy more stock than you'd be able to normally.

What items should you not purchase with a credit card? ›

Although it may be possible to buy an inexpensive house with a credit card, you won't be able to do the same with a down payment on a mortgage loan. That's because the primary purpose behind a down payment is to demonstrate your investment in the home to your lender.

Although it is technically not possible to pay for stocks using credit cards, any illegitimate transaction may lead to legal consequences. Furthermore, credit cards in general provide unsecured loans. As they can be used for any purpose, there is a high chance of fraud.

Credit cards, however, are not the best way to dip your toes in the stock market. Although it is possible to buy stocks with a credit card, experts recommend against it. “Brokerage firms prefer you fund your brokerage account using bank transfers or checks,” according to an April 10 Forbes Advisor article.

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

A less aggressive investment mix, meaning one with a lower allocation to stocks, may be expected to result in slightly lower returns (on average) over the long run. And with slightly lower expected returns on investing, paying down debt comes out ahead even at slightly lower interest rates.

A credit card company might seem counterintuitive heading into a recession because credit card defaults typically rise when the economy tightens. However, the Fed's stress testing showed that American Express (AXP -0.74%) would perform extremely well during an economic downturn.

We only support debit cards issued by a US bank in the Visa and Mastercard networks. We don't accept prepaid or credit cards. We also limit the number of cards you can link to a single account. Terms of Service and other fees may apply.