You need cash to buy stocks, as investment brokers often require funding from a bank account. Some brokers, such as Stockpile, accept cash from debit cards.
You have two options to get cash from your credit card. Keep in mind that these moves come with interest and other drawbacks.
- Credit card loans. With a credit card loan, you can borrow against your card’s credit limit and get a cash deposit in your account. You’ll repay the loan in installments at an agreed-upon interest rate, usually lower than your card’s annual percentage rate, but possibly higher than personal loan rates.
- Cash advance. A cash advance allows you to get cash from your credit card using an ATM, bank withdrawal or a convenience check. Cash advances usually have fees, a higher APR than your card’s purchase APR and no grace period, so interest charges start accruing as soon as you take cash out.
Does Buying Stocks With a Credit Card Affect Your Credit Score?
Credit scoring systems don’t know what you’re charging on your credit cards, but they do know how much of your credit line you’re using and whether you pay your bill on time and in full. Your credit card balance and credit utilization go up whether you’ve gone on a shopping spree or taken out a cash advance or credit card loan for investments.
Using too much of your credit limit can hurt your credit score. “The higher your balance, the (closer) you are to your limit and the higher your utilization ratio will be,” says credit expert John Ulzheimer, who formerly worked for Equifax and FICO. “That’s not a good thing for scores.”
Planning a larger financial move, like buying a home or car? Having a significant balance for any reason can hurt your chances of getting approved for a loan. “If you’re planning to apply for a loan, you’ll want to have that balance paid way down, especially if it’s using up a lot of your credit line,” says Jeff Richardson, senior vice president of marketing and communications with VantageScore Solutions.
If you’re hoping to pay back your balance quickly with investment gains, you might not be concerned about a short-term credit score drop. But if gains don’t materialize quickly enough for you to pay the balance – and they likely won’t – a short-term credit score drop could become long term.
