The most common way to buy stocks is through a direct bank transfer, but what about those who prefer to pay with a card? Can you buy stocks with a credit card?
Most brokerage firms will not allow you to buy stocks directly with a credit card. Instead, you can use a credit card to secure a cash advance or purchase and resell a gift card. These funds can then be used to buy stocks.
There are many benefits for buying stocks with a credit card. You can get credit card rewards points or buy stocks when the timing is right.
Luckily for you, I’ll show you how to buy stocks with a credit card. I’ll show you the pros and cons of doing so, where you can buy stock with credit cards, and the best credit cards. You’ll be able to purchase your first stock in no time!
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How Do You Buy Stocks With a Credit Card?
To buy stocks with a credit card, you’ll need to choose between getting a cash advance or purchasing and transferring a gift card. You can then use the money from the cash advance or reselling gift cards to fund your stock purchases.
Credit Card Cash Advances
Credit card cash advances are when you borrow against your line of credit, receiving cash funds you must eventually pay back. Similar to when you use a debit card to take money out of an ATM, the main difference is that a cash advance is borrowed instead of pulling from your funds.
Getting an advance includes fees, interest, and withdrawal limits. Generic cash advance fees range from 3% to 5% of the advanced amount. Some cards charge a flat fee instead of a percentage rate. Fees are charged when your advance is processed.
Interest rates for credit card cash advances fall in the credit card Annual Percentage Rate (APR) range. Most credit card cash advance interest rates range from 17.99% to 29.99%. Interest begins accumulating the moment your cash advance is processed.
Finally, most credit cards will limit your cash advance to a percentage of your total credit card limit. If the limit is 30%, for example, and you have a $9,000 credit limit, you can take out a maximum of $3,000 in a cash advance.
You can request a cash advance from a credit card at an ATM, in person at the corresponding bank, or through cash advance convenience checks. You’d need to choose one of these three methods even if you made your original advance request online.
Once you have your cash advance, you can use it however you’d like. To buy stocks, keep the cash in your banking account, connect your bank account to your brokerage account, and transfer the funds you want to use to purchase stocks.
Gift Cards Purchased with Credit Cards
Using a credit card to purchase a gift card for stocks involves more steps than requesting a cash advance. Note that you will lose some of your initial investment through this method.
First, you’ll need to buy a gift card using your credit card online or at a local shop. This could be a generic Visa gift card or a gift card connected to a specific store.
You cannot use your gift card directly on a brokerage account, so you’ll have to trade it in for cash first online. Websites like Card Cash buy back gift cards. They purchase your gift card for less than its face value, meaning you will lose a few dollars in the transaction.
These websites pay you to either your ACH bank account or your PayPal account. If you choose to send the money to your PayPal account, you’ll likely need to move it to your checking account to use with a brokerage. Alternatively, you can buy some cryptocurrency directly through PayPal.
Once the money is in your bank account, you’ll be able to transfer it to your brokerage account to purchase stocks.
What Are the Pros and Cons of Buying Stocks With a Credit Card?
It’s always preferable to buy stocks with cash if you can. Buying stocks directly with your bank account streamlines the process.
Choosing to buy stocks with a credit card comes with benefits and downfalls.
Benefits of buying stocks with credit cards
If you don’t have the cash at hand, using a credit card could help you purchase stocks at a historically low price. If you had to wait for your next paycheck for this purchase, the stock could skyrocket and be inconvenient to buy at a later time.
Credit card rewards are easier to obtain because you are ‘manufacturing spending.’ Manufactured spending is when you find ways to spend money with a credit card that you’ll easily pay back. This spending results in you racking up credit card rewards like airline miles.
Disadvantages of buying stocks with credit cards
Buying stocks with a credit card requires many steps and is expensive. You immediately start in the red because you now owe your credit card, whether from a cash advance or from purchasing a gift card you’ll later sell. Interest rates on a credit card are also much higher than those on most personal loans.
When you use your credit card or take out a cash advance, you may negatively affect your credit score. The more credit you use, the more it may lower your score.
Where Can I Buy Stocks With a Credit Card?
You can purchase stocks with a credit card in the U.S. through a stockbroker or brokerage firm. You can open most brokerage accounts online. Unfortunately, most major U.S. brokerage firms do not accept direct stock purchases with a credit card.
Brokerage firms like TD Ameritrade, Charles Schwab, and Fidelity Investments accept deposits through bank transfers, wire transfers, checks, or even Venmo or PayPal.
If you use your credit card for a cash advance or buy gift cards you will later resell, these funds can easily be transferred from your bank account to any major brokerage account.
Which Credit Card Is Best for Buying Stocks?
When using a credit card to buy stock, you should look for the lowest interest rates possible. If you plan to ask for a cash advance, you should also look for low or no fees for this service.
Credit Cards With Low Cash Advance Fees
The Milestone Gold Mastercard requires no fee for a cash advance during the first year. It has a 29.90% cash advance APR and 24.90% regular APR on purchases.
The Capital One Spark Cash for Business is an excellent option if you are an independent contractor with your own business. It charges a $10 or 3% fee for cash advances with a 26.99% advance APR and 20.99% standard APR.
The Simmons Visa requires excellent credit to obtain, offering a $4 or 3% of transaction fee for advances. The cash advance APR varies from 14.25% to 22.25%, and its regular variable rate is from 10.25% to 18.25%.
Credit Cards With Low-Interest Rates
These top credit cards offer 0% interest rates for the first 12-15 months of use, followed by some of the lowest interest rates on the market.
The Capital One Venture card offers 0% APR for 15 months followed by a 14.99% to 24.99% regular APR depending on your creditworthiness. You will earn 1.5% cashback on every purchase.
The Bank of America Customized Cash Back card has an introductory APR rate of 0% for the first 15 billing cycles. Depending on your credit score, APR then varies from 14.99% to 24.99%. You can also earn 3% cash back for the purchase category of your choice and 1% on all other purchases.
The Citi Diamond Preferred card offers no interest for the first year, followed by an APR of 12.74% to 23.74% depending on your creditworthiness.
Summary: Can You Buy Stocks With a Credit Card?
Overall, no advertised U.S. brokers accept credit card payments in exchange for stocks. You can use your credit card to secure a cash advance or purchase then resell a gift card. This cash can then be used to buy stocks on your trading account.
Using your credit card in this way will cost you interest, fees, and time. If you have the cash available, purchasing your stocks directly through your bank account is much more efficient.
The benefits of buying stocks with a credit card include:
- Getting cash to buy stocks at a good time and price
- Building credit card rewards
The disadvantages of buying stocks with a credit card include:
- High fees or interest through credit card cash advances
- Taking out a loan that needs to be paid back
- Better means available for obtaining cash quickly to purchase stocks
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TightFist Finance
John is the founder of TightFist Finance and an expert in the field of personal finance. John has studied personal finance for over 10 years and has used his knowledge to pay down debt, grow his investment portfolio, and launch a financial based business. He is committed to sharing content related to personal finance based on his experience in his career, investing, and path towards reaching financial independence.