Can We Buy Shares Using Credit Card In India – Should You Do It?

Can We Buy Shares Using Credit Card In India – Should You Do It?

Can We Buy Shares Using Credit Card In India: Bills, rent, groceries….and stocks? Credit cards are used for all sorts of payments but can you use them for investing? Credit cards, like any other tool, are an asset if used wisely.

If you’re smart with it, it can build your credit score over time, allowing you to apply for loans for large purchases such as a wedding, a house, a car, etc.

They give salaried professionals an opportunity to prove their “creditworthiness” by building something called a credit score. In this blog, we’re going to answer the question for both investors and credit card holders – Can we buy shares using credit card in India?

Before we answer this question, you must first ask yourself – Should you use a credit card to buy shares? 

Should You Do It?

It is never recommended to buy securities using debt, be it loans or credit cards. You must understand that there are no promised returns that can be assured in the market, no matter how many advisors and experts say otherwise. 

It could potentially lead you into a debt trap, especially if you invest in stocks based on the recommendations of someone else. 

Risk Of Buying Shares Using Credit Card

Investing carries a level of risk, irrespective of how well the company performs or the market situation. 

If you’re buying stocks on credit, then chances are that you currently cannot afford to buy the securities to investors. 

This means that you have borrowed money that you cannot pay back. 

If for any reason your initial investment makes losses, then your overall debt increases on two fronts –

  • First to repay the loan that you have taken to buy the securities and
  • Secondly, to recover the losses that you have incurred. 

Is Buying Shares Using Credit Cards Just Risky Or Is It Fraud?

Ask any reputable brokerage firm and they will all tell you that credit card-based investments are not allowed. 

Credit cards have a higher chance of fraudulent activity and the recovery process is extremely tedious and time-consuming, not just for you but for every party involved – The brokerage firm, SEBI, your credit card company, and the cybercrime division.

Can We Buy Shares Using Credit Card In India

SEBI does not allow the use of credit cards for any sort of investment.

The reality is that most credit card holders do not pay their bills on time. This means they will rake up many different charges such as interest, late payment charges, and late payment interest. 

This complicates matters when you add securities such as stocks to the mix. An already indebted individual, who buys securities on credit, increases his overall leveraged position, which can only dig a deeper debt trap. 

Investing is an activity done with excess capital in your bank account. That is after deducting your monthly expenses, loan payments, and savings. 

Also Read: What Is A Credit Score? And The Factors That Affect It!

Takeaway

You can use your credit card to pay bills, increase your credit score, score credit points, and balance your budget for the month. But buying shares is a different activity altogether. 

If you’re passionate about investing, try budgeting and investing small amounts of money regularly through SIPs. That’s all for the post on Can We Buy Shares Using Credit Card In India, Hope you enjoyed reading it. Happy Investing!

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