I Charge Everything But I Won’t Use My Credit Card to Do This

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Although I always put purchases on a credit card, I would never charge investments on my card. Read on for a few reasons why. 

My credit cards go everywhere with me. And rather than relying on cash or a debit card linked to my bank account, I use my credit cards to buy everything possible. I even pay utility bills and my cellphone bill using my credit card.

I use my card for anything I can both for convenience and because I want to maximize the rewards available. But, despite the fact I’m very comfortable charging things (and paying off the balance), there is one thing I would absolutely never do with my card: buy investments. Here’s why.

Most reputable firms won’t allow you to charge investments

One big reason why I am not interested in charging investments is that my brokerage account won’t allow me to purchase stocks or ETFs with a credit card. In fact, most reputable brokers don’t accept credit card payments for investments.

While I could do a cash advance to get money from my cards that could then be deposited into my brokerage account, cash advances typically come at very high rates. In fact, the average rate for cash advances is about 24.80%. It’s extremely unlikely that I would be able to earn high enough returns on my investments to even cover these fees, much less make money after paying them.

Since getting cash from my cards is off the table, investing with them simply wouldn’t be possible with most brokers. And, when an investment can be purchased with a credit card, that immediately makes me suspicious that it might be a scam since this usually isn’t permitted.

I won’t borrow money to buy something that carries risk

Even if I was able to purchase stocks with a card from a reputable broker, I would be very unlikely to do so.

Even “safe” investments carry some level of risk — especially in the short term. I would want to make my credit card payments before I’d owe interest, which would only give me until my statement balance came due at the end of 30 days. Investing on such a short timeline increases the risk I would lose money that I put into the market because stocks are more likely to go down in the short term.

If I lost money, I would have to come up with cash out of my bank account to pay back the cards — or get stuck paying interest on my balance. With the average credit card interest rate at 20.09%, I would again find myself in a situation where I’m paying more in interest on my cards than my investments could reasonably be expected to earn.

Since I won’t invest using my credit cards, but I do want to get money into the market, I make sure to budget to put cash into the stock market every month. In fact, I have automated transfers to my brokerage firm on payday so I’m investing regularly every single month. I’ll use my cards for all the purchases I make, but I make certain to get this cash into the market first so I can grow my wealth without the added risk of borrowing to do so.

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