Most investment platforms won’t accept credit cards as a payment method. However, if you really want to use plastic, there are a few indirect ways to try. On the other hand, using a credit card to invest is a risky matter. Before you do it, know that most experts turn their thumbs down at the idea.
Scotiabank Value Visa Card
Eligibility criteria, terms and conditions, fees and charges apply
Purchase interest rate
Scotiabank Value Visa Card
Apply today and enjoy a 0.99% introductory interest rate on balance transfers for the first 6 months.
- Purchase interest rate: 12.99%
- Cash advance rate: 12.99%
- Intro balance transfer rate: 0.99% for the first 6 months
- Standard balance transfer rate: 12.99%
- Annual fee: $29
- Minimum income: $12,000
Investing with a credit card can be risky and is usually not advised. But if you’re raring to go, here are a few ways to do it.
- Take out a cash advance. Once you take out your cash advance, funnel it into your brokerage. For example, you could deposit cash into your bank account, which you’ll link to your trading account. You may also be able to deposit directly into your trading account with a cash advance cheque. There are big downsides to this method, however: Cash advances typically come with fees and higher interest rates. Also, they start accruing interest immediately – there is no grace period.
- Leverage PayPal. Create two PayPal accounts and link one account to your credit card and the other to your bank account. Once you’ve done this, send money to yourself from the credit card–linked account to the bank-linked account. You may be able to fund your brokerage account directly through PayPal. If not, you can withdraw your PayPal funds to your bank account, which you’ll link to your brokerage.
- Sign up for Mylo. While the well-known Acorns app serves the US, Mylo was recently created with many of the same features and services in mind. Available to Canadians, you can use the app to make micro-investments, where the money is invested in conservative exchange traded funds (ETFs). The app allows you to link your credit cards, as well as debit cards.
- Use a 0% or low APR balance transfer credit card. With a balance transfer, you can consolidate your debt from other sources onto your balance transfer credit card. You can take advantage of this by acquiring money through credit and then moving your debt to a balance transfer card that offers a low or 0% rate. If you’re paying a low rate of say 1.99%, you’ll want to make sure your returns can cover that cost. For example, you can use the PayPal strategy discussed above and then use a balance transfer to move your debt to a 0% or low APR card. Just make sure you pay back the balance before the introductory 0% or low rate promotion ends. Another thing to watch out for is balance transfer fees, which can cost you between 1-3% of your transferred amount.
Learn more about balance transfer credit cards
It’s tempting to use a credit card to purchase investments. You can extract money from your card, then take advantage of the grace period from any accrued interest. Meanwhile, you can invest that money and hopefully start collecting a return on your investment before the interest kicks in.
While that sounds great in theory, in practice it rarely pans out. Credit card APRs are generally between 8% and 24% — that’s a high price to pay to borrow money. In addition, most providers consider withdrawing funds on a credit card a cash advance transaction. A cash advance interest rate is usually higher than a purchase interest rate and you’ll also face a cash advance fee.
It’s not guaranteed that you’ll get a return on your money higher than the interest you’ll be paying to borrow the money from your credit card in the first place.
Learn more about credit card cash advance interest rates
As always, your investment decisions are up to you. However, many experts recommend investing with money you already have and would likely never recommend using your credit card to dive into investments. If you’re going to borrow money to invest, do your research and make sure you’re aware of any risks.
If you want to invest on credit, consider opening a margin account instead. These accounts let you borrow money to purchase investments. For example, you might pay for half of an investment then borrow the remaining funds from your broker.