Can You Buy Stocks with a Credit Card?

Found a stock that you're itching to invest in but running low on liquid cash? You're probably wondering whether you can use your credit card to buy stocks through a broker like Interactive Brokers or Webull.

The answer isn't as simple as a yes or no -- it's possible to buy stocks with a credit card, but you probably shouldn't. We're going to walk you through the how and what you need to consider before moving forward.

How to Buy Stocks with a Credit Card

It turns out you can buy stocks using a credit card, but there are a few things to know before you get started. Brokers won’t let you connect your credit card and rack up debt, but you can request a cash advance and turn part of your credit limit into cash. You can then deposit this cash into your brokerage account and invest in your favorite stocks. 

Can You Get Reward Points by Using a Credit Card for Stock Purchases?

In most cases, you cannot get reward points by using a credit card to buy stocks. Credit card companies treat buying stocks as a cash-like transaction, which makes them ineligible for points. You also do not earn points when requesting a cash advance and transferring those funds into your bank account to buy stocks. 

Things to Consider Before Buying Stocks with a Credit Card

A credit card isn’t the best resource for buying stocks, but it is an option. You can get quick access to cash without much work and consider using it for a short-term opportunity. If you are interested in buying stocks with a credit card, consider these factors before getting started. 

Investment Fees

Most brokerage firms enable zero-fee stock trading, but you will incur a fee if you trade options. Check with your brokerage how much it will cost to execute both sides of the trade. You will have to pay fees to buy options contracts to open a position, and you will also have to pay fees if you want to close an options contract early. It’s also important to consider the expense ratio if you invest in funds. However, the expense ratio applies to long-term investing rather than finding a quick opportunity to make a profit.

Cash Advance Fees

Credit card issuers charge cash advance fees for taking out cash against your credit limit. This fee will increase your credit card’s total balance and result in higher interest payments each month. Paying it off quickly can mitigate the impact of a cash advance and its fee, but you may want to consider another option if your card has an excessive fee. 

Fraud Risks

Buying stocks with a credit card involves a workaround. You have to transfer your money into your bank account and use that account to fund your brokerage accounts. Brokerage firms that ask you to put in your credit card information can be fraudulent. The U.S. Securities and Exchange Commission (SEC) mentions that the most reputable brokerage firms do not let investors use their credit cards. If a broker tells you that investing with your credit card is as simple as filling in your credit card details, it’s likely too good to be true. 

Some companies like Acorns let you link your credit card, but this action is for the round-up feature. You cannot use your entire credit limit to buy stocks. Acorns also provides rewards in the form of investments if you buy from its partners. It’s similar to traditional credit card rewards programs, but you get small investments instead of points. You should still proceed with caution if any entity asks for your credit card information and lets you buy stocks with it.

Transfer Fees and Interest

You will have to pay a small fee to transfer money from your credit card to a bank account. This fee will increase your total credit card debt and also result in more interest. Your balance can grow faster than you anticipated if you frequently use it for stock purchases.

Borrowing That Exceeds Your Ability to Repay

The money you borrow today eventually has to get repaid, and borrowing more money makes it more difficult to become debt-free. Investors should consider the long-term impact of using a credit card to buy stocks. This can also turn into a bad money habit and tempt investors to rely on their credit cards for stock purchases. 

Purchasing Methods

The type of credit card you use to buy goods and services can impact your investing. Some brokerage firms offer credit cards that reward you for every purchase. These rewards come in the form of investments instead of receiving cash or points back. Rewards vary depending on the broker you use for your investing.

Frequently Asked Questions