What Is Credit Card Funding?

By
Julia Kagan
Julia Kagan
Full Bio

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

Learn about our editorial policies
Updated May 04, 2023
Reviewed by
Toby Walters
Toby Walters
Reviewed by Toby Walters
Full Bio
Toby Walters is a financial writer, investor, and lifelong learner. He has a passion for analyzing economic and financial data and sharing it with others.
Learn about our Financial Review Board
Fact checked by
Suzanne Kvilhaug
Suzanne Kvilhaug
Fact checked by Suzanne Kvilhaug
Full Bio
Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands.
Learn about our editorial policies

What Is Credit Card Funding?

Credit card funding can provide capital to a new business or venture using a credit card. Credit card funding can provide an available source of borrowed funds for start-ups. Investment firms registered with the Securities and Exchange Commission (SEC) do not allow credit card funding for investing, but most cryptocurrency exchanges do.

Key Takeaways

  • Credit card funding can fund a new account, business, or venture.
  • Credit card funding provides an alternative to business owners who may not be able to obtain a traditional loan.
  • The SEC discourages financial investments using credit cards.
  • Cryptocurrency exchanges allow credit card funding for investment.

Small Business Credit Card Funding

It may be difficult for small businesses or new start-ups to obtain capital for inventory or rent. Credit card funding may provide an option if the business owner cannot acquire a loan. While credit card funding can purchase items for a new business, it cannot fund most banking or financial investments.

Credit Cards and Investing

Most licensed Securities and Exchange Commission (SEC) registered investment firms do not allow customers to invest using a credit card. The Securities and Exchange Commission's Office of Investor Education and Advocacy discourages investors from using credit cards to fund their investments due to the risks associated with credit card scams and unauthorized use. However, investors interested in purchasing cryptocurrency through providers like Bitcoin can use credit cards.

The SEC warns that unregistered and unlicensed sellers that request a credit card to purchase a stock, bond, or other interest in a company or investment opportunity may be a scam. 

Establishing Bank Accounts

Certain banks may allow credit card funding to open an account to meet the minimum balance requirements if the card is included. It can be a way for the credit card holder to meet spending minimums to earn a signup bonus or cash back. Credit card holders should review their card agreement to determine whether the card company considers credit card funding a cash advance.

Some institutions that accept electronic funding may not allow credit card funding but may accept funding via debit card, where funds are transferred if they are in the cardholder's account.

How Many Small Businesses Use Credit Cards to Support Their Companies?

The U.S. Small Business Administration (SBA) reports that 46% of all small business owners use personal credit cards to start or operate their businesses.

What Funding Besides Credit Cards and Loans Is Available to Start-Ups?

Besides taking on personal debt financing through loans or credit cards, new small businesses may be able to acquire venture capital or attract an angel investor.

How Does Interest Affect Investments When Using Credit Card Funding?

The interest and fees borrowers pay on credit card purchases might significantly erode any return on their investment. Depending on the type of investment made with a credit card, and how high the interest rate is, investors may lose money.

The Bottom Line

Credit card funding can provide cash for a new business or venture and a funding option for business owners unable to obtain a traditional loan. The SEC discourages individuals from using credit cards to fund financial investments. Most licensed advisors will not accept credit card funding. However, investing in cryptocurrency using credit card funding is allowed on most exchanges.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

  1. Bitcoin. "Buy Bitcoin With a Credit Card or Debit Card."

  2. Financial Investment Regulatory Authority. "Using Your Credit Card To Invest? Think Again."

  3. U.S. Small Business Administration. "10 Stats That Explain Why Business Credit is Important for Small Business."

Open a New Bank Account
×
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.
Sponsor
Name
Description