On May 22, FINRA warned on risk of credit cards for investing.
- FINRA reported SEC Feb. 2018 alert on risks from using cards to buy investments.
Considerations before using a credit card to invest.
- Most licensed firms do not allow customers to invest using a credit card, therefore pressure to use a credit card to invest is suspicious and might be a sign of a scam.
- Use FINRA's BrokerCheck and SEC's Investment Adviser Public Disclosure website.
- Interest paid on the credit card might significantly erode return on the investment.
- Failure to pay minimum amounts, might lead to taking on additional fees, charges.
- Impact on credit scores, could hamper the ability to secure a loan like a mortgage.
Other advice
- Check statements for unauthorized charges and report them to the card company.
- Third-party wallet service or payment processor might mean less recovery options.
- Some payment processors, Square and PayPal are licensed as money transmitters.
- Look out for delay in withdrawal of payments, as scammers often use delay tactics.
- Firms may hold up withdrawal request until it is too late to dispute the card charge.
