# Why can't you buy shares with a credit card?



## Tyler Durden

I have googled this and it appears that you can't buy shares using your credit card. Does anyone know the rationale behind this?


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## danbradster

It sounds like gambling to me.  Their calculations of credit safety will be way off if the person is gambling.  There could be other reasons too.


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## howardbandy

In the US, settlement for stock transactions is required within 3 days of the transaction -- called T+3.  (It is T+1 for government securities and options.)  Credit card charges are not finalized within that time.

The clearing corporation needs assurance that the funds have been collected.  Charging something to a credit card is not a payment -- it is a promise to pay.  

Credit card companies tend to side with the purchaser rather than the merchant.  When a purchaser challenges a charge to their account, the credit card company often reverses the charge -- retrieving funds from the merchant and either refunding them to the purchaser or holding them in escrow until the complaint is resolved.  

If a person made a purchase of shares using a credit card, followed by the shares falling in price, followed by either a challenge of the charge or a failure to pay the charge account bill, the clearing house could be in a position to be the guarantor of the transaction, but without the funds to cover it.

Thanks,
Howard


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## prawn_86

From an anti-money laundering perspective it could also be classed as a third party payment. If you pay with a cc your broker is receiving the funds from Visa, Mastercard etc and not directly from yourself, which is against AML laws.


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## skc

Tyler Durden said:


> I have googled this and it appears that you can't buy shares using your credit card. Does anyone know the rationale behind this?




That would be nice.... forget about credit implications for a while. I would get a few million frequent flyer points and 55-day interest free on my share purchases.


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## Garpal Gumnut

For the same reason that you cannot buy peace with a woman with a credit card.

gg


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## skc

Garpal Gumnut said:


> For the same reason that you cannot buy peace with a woman with a credit card.
> 
> gg




Well... you might have the wrong credit limit or the wrong woman.


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## Garpal Gumnut

skc said:


> Well... you might have the wrong credit limit or the wrong woman.




Sorry, I should have said a permanent peace, not a Chamberlain piece of paper " Peace this time ".

gg


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## pixel

Tyler Durden said:


> I have googled this and it appears that you can't buy shares using your credit card. Does anyone know the rationale behind this?



 Broker accounts have to be settled with cleared funds within T+3.
A credit card payment is settled up to 55 days in the future, which does not constitute "cleared funds."


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## RandR

Tyler Durden said:


> I have googled this and it appears that you can't buy shares using your credit card. Does anyone know the rationale behind this?




Would it be possible if you withdrew the credit card on 'cash advance' and then deposited the cash in a bank account to settle your trades in.

...

I wouldnt try it.


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## YELNATS

RandR said:


> Would it be possible if you withdrew the credit card on 'cash advance' and then deposited the cash in a bank account to settle your trades in.
> 
> ...
> 
> I wouldnt try it.




That would be possible, but also foolhardy.

Most if not all credit cards start charging you interest, at their prohibitive rates, immediately from the day of the cash advance. ie. you don't receive any "up to 55 days" to settle the credit card debt interest-free.


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## Tyler Durden

Thanks everyone for replying.



howardbandy said:


> The clearing corporation needs assurance that the funds have been collected.  Charging something to a credit card is not a payment -- it is a promise to pay.
> 
> Credit card companies tend to side with the purchaser rather than the merchant.  When a purchaser challenges a charge to their account, the credit card company often reverses the charge -- retrieving funds from the merchant and either refunding them to the purchaser or holding them in escrow until the complaint is resolved.
> 
> If a person made a purchase of shares using a credit card, followed by the shares falling in price, followed by either a challenge of the charge or a failure to pay the charge account bill, the clearing house could be in a position to be the guarantor of the transaction, but without the funds to cover it.
> 
> Thanks,
> Howard




That is a very good point, I did not think about that. But I wonder what would happen if someone 'hacked' into my comsec account and bought all these shares without my authorisation, then I dispute it - how would/could anything be reversed, if at all?



skc said:


> That would be nice.... forget about credit implications for a while. I would get a few million frequent flyer points and 55-day interest free on my share purchases.




Yes that is what I was thinking. Will scratch that one off the list


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## McLovin

pixel]A credit card payment is settled up to 55 days in the future said:


> Would it be possible if you withdrew the credit card on 'cash advance' and then deposited the cash in a bank account to settle your trades in.
> 
> ...
> 
> I wouldnt try it.




Back before the GFC a few people were applying for a credit card then withdrawing cash up to the limit then doing a balance transfer to a new card at a low intro rate.


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## Tysonboss1

Who would be paying the credit card fee,

Eg, visa and MasterCard charge the retailer 1%, American express charge the retailer 3% to use your card, 

Would you be expecting the counter party to pay that fee, or would it be added to your brokerage,


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## TheScientist

McLovin said:


> From the point of view of the merchant, the funds are available immediatley as cleared funds in their account. Of course if the card holder disputes the charge (and the dispute is upheld), or the charge is fraudulent then the funds come back out of the merchant account.
> 
> 
> 
> Back before the GFC a few people were applying for a credit card then withdrawing cash up to the limit then doing a balance transfer to a new card at a low intro rate.





This is still an option, right?


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## boofis

McLovin said:


> Back before the GFC a few people were applying for a credit card then withdrawing cash up to the limit then doing a balance transfer to a new card at a low intro rate.




Have not been able to get a credit card before so just wanted to confirm that it's possible to withdraw cash off a cc? I have always been told the opposite by banks.


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## CanOz

boofis said:


> Have not been able to get a credit card before so just wanted to confirm that it's possible to withdraw cash off a cc? I have always been told the opposite by banks.




Yup, sure is. We just Got back from Canada today, all cash needed was withdrawn on the card.

I did however, make sure the card was in credit before I left but it's not a requirement.


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## stewiejp

Every Credit Card I have owned (not that there has been many) has been able to withdraw at the ATM, just be aware you will be paying interest on that cash from the minute you withdraw it (unless the account is in credit) - there is never an interest free period on cash withdrawals, only purchases.


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## TheScientist

This card has a 0% cash advance rate for 6months:

http://www.creditcardfinder.com.au/citibank-clear-platinum-visa-credit-card-details-application.html


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## Tyler Durden

I just found out that you can buy gold/silver using a credit card. So...I'm unsure how, but maybe a loophole can be exploited if you can buy metals using a credit card but not shares?


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## mistersmith14

I like the lessons I learned from this. Thanks everyone.


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