Can You Purchase Robinhood Shares with A Credit Card?

How to Purchase Robinhood Shares With A Credit Card

While you can't directly buy Robinhood shares with a credit card, you can use an indirect method. This guide outlines the general process, which typically involves a cash advance.

1. Understand the Cash Advance Process: Since direct deposits are not supported, the most common route is a credit card cash advance. Be aware that this usually comes with high fees and interest rates that accrue immediately.
2. Choose the Right Card: Not all credit cards are equal, especially for cash advances. Selecting one with lower fees and a more favorable APR is crucial. To find a card that aligns with your financial strategy, you can use resources like the Kudos explore cards tool.
3. Transfer Funds to Your Bank: Once you take a cash advance, deposit the funds into the bank account that is linked to your Robinhood profile. Ensure the transfer is complete before proceeding.
4. Fund Robinhood and Purchase Shares: After the money is in your bank account, initiate a transfer to your Robinhood account. Once the funds clear, you can proceed with purchasing your desired shares.

Impact On Your Credit Score

Using a credit card to purchase shares on a platform like Robinhood can affect your credit score in several ways. Here are a few key factors to keep in mind before you proceed.

• Credit Utilization. A significant stock purchase can increase your credit utilization ratio, a major component of your credit score. Lenders prefer low balances relative to your credit limit, so a high ratio can be detrimental.
• Cash Advance Treatment. Brokerages may process credit card deposits as a cash advance, not a standard purchase. These transactions often incur steep fees and higher interest rates that start accruing immediately, which can be costly.

Alternative Ways To Purchase Robinhood Shares

Funding Through Bank Transfers

The primary method for purchasing shares on Robinhood involves funding your brokerage account directly from a linked bank account. By initiating an Automated Clearing House (ACH) transfer from your checking or savings account, you can deposit funds without using a credit card. This standard process is secure and avoids potential cash advance fees that credit card issuers might charge for investment-related transactions. Once the funds settle, they are available for you to buy stocks.

Utilizing Different Order Types

Beyond a standard market buy, you can adjust order settings for more control over your purchase. A limit order, for instance, allows you to set the maximum price you are willing to pay for a share, and the trade will only execute if the stock hits that price or lower. Additionally, you can set up recurring investments to automatically purchase a set dollar amount of stock on a regular schedule, which facilitates a dollar-cost averaging strategy without manual intervention.

Choose the Right Card to Purchase Robinhood Shares

Selecting the right credit card to buy Robinhood shares can significantly enhance your investment. Whether you're aiming for maximum cash back, travel rewards, or a card with no annual fee, the choice matters. To navigate the nearly 3,000 options available, Kudos offers a powerful, data-driven tool that matches you with the perfect card based on your personal preferences. With 95% of the cards in their database free from affiliate commissions, you can trust the recommendations are unbiased. Explore card options and make your investment work even harder for you.

For those wanting to maximize their credit card benefits, Kudos is the ultimate free tool for online shopping. We are also offering $20 back on your first qualifying purchase when you sign-up for free with the code "GET20" and shop at a Boost merchant.

Frequently Asked Questions

Why can't I use a credit card to buy stocks on Robinhood?

Robinhood restricts credit card use to comply with financial regulations and protect investors from high-interest debt risks.

Are there alternative funding methods besides bank transfers?

Besides standard bank transfers, you can also fund your account using a debit card for instant deposits.

Can I use a cash advance from my credit card to fund my account?

Using a cash advance is strongly discouraged due to the very high fees and interest rates typically charged.