How To Buy Stocks With a Debit Card

Article Summary:

Today’s investment platforms offer more options than ever. This includes the option of buying stocks with a debit card. Discover how to buy stocks and which options allow you to use your debit card.

Table of contents:

Buying stocks can be exciting. It means you’re taking ownership of a company or multiple companies in the stock market. Not that long ago, stock purchases and ownership were only for the rich. But it has never been easier for anyone to purchase stock.

It is even possible to buy stocks with a debit card without providing your bank account or checking account information. In this article, we’ll look at buying stocks with your debit card.

Opening your brokerage account

Before buying and trading stocks with your debit card, you will usually need to open a brokerage account. While this process usually takes no longer than 15 minutes, you will need to meet certain qualifications. And you’ll have to provide a few things to your financial institution.

First, you need to be at least 18 years old in most cases to open up a brokerage account. Next, you’ll need to verify your identity. You can normally do this using your government-issued driver’s license or your Social Security number.

Some brokers might require you to verify a transaction before you can use your debit card for online trading. If this is the case, you will need to wait for the broker to deposit a small sum of money — usually a few cents — into your bank account. Then you’ll confirm how much money it was by letting the broker know the exact amount.

After this is complete, you can use your debit card for your investment transactions.

Fund your investment account with your debit card

Before you can buy stocks, you need to have an investment account and make sure you’ve deposited money to fund it. When you buy stocks online, you generally do it through a brokerage account, as already noted. However, there are other accounts that you can open and buy stocks through. But a brokerage account is the most common account used.

Once you have your brokerage account open, you can fund it with your debit card and begin online trading.

For some time, there’s been a standard way to fund brokerage accounts. That has been to transfer money from your checking account to your brokerage via an ACH transfer. You can also use a savings account, but most trading platforms recommend a checking account. This prevents your violating savings accounts’ transactions limits.

ACH stands for Automated Clearing House. It’s the main system financial institutions use for electronic fund transfer (EFT) transactions.

ACH transfer from checking is no longer your only option. You may be able to fund your account and buy stocks with a debit card. Support for this option is becoming more and more common.

To set up ACH transfers, you would enter your account number and your bank’s routing number. To set up funding by debit card, you enter your debit card information, just like you would for a purchase.

Once the money’s in your brokerage account, you can use it to fund your purchases. These might include stocks, exchange-traded funds, or other investment vehicles. What you can buy will vary from one online trading platform to another.

Pros and cons of using your debit card to buy stocks

REVIEW & WEIGH THE PROS AND CONS

Here is a quick summary of the advantages and drawbacks of using a debit card to buy stocks.

Pros
  • Convenience.
  • Fast deposits.
  • No debt.
Cons
  • Checking account overdraft fees.
  • Declined transactions.

Convenience

Most people already use their debit cards for everyday purchases. This makes it easy and natural to buy stocks the same way. Once you’ve opened an account, getting started with debit card purchases is easy. You just set up your debit card in your account. Then you’re ready to purchase stocks just like you would make purchases on any other website.

Fast deposits

This might not sound like a big deal. But being able to skip some of the wait time and buy stocks immediately can be worth a lot. It lets you make stock trades in your brokerage account whenever you want to. According to some, debit card deposits get done faster than checking account transfers.

Most investment platforms have a mobile app. This lets you trade stocks from anywhere — as long as you have the funds. Faster deposits could mean you don’t miss a time-sensitive trade on the road.

Debt-free trading

When you use a debit card, you don’t go into debt. For many people, this is an important advantage of using debit cards when buying stocks. When your investment account is tied to a debit card, the funds you spend are limited to whatever is in the account.

Checking account overdraft fees or declined transactions

If you run out of money, though, the card will be declined. This will happen unless you “opt in” to debit card overdrafts. When you do so, you’re often said to be opting in to “overdraft protection.” The opt-in “protects” you from having transactions declined due to insufficient funds. If you sign up for overdraft protection, your bank will loan you the money to cover transactions that exceed your balance. And, of course, they’ll charge you a fee to do so. Since you’re using debit rather than credit, this isn’t technically a “cash advance fee.” But it’s the closest you can get to one when using a debit card.

If you don’t opt into overdraft protection, you can avoid this fee. But if you then have an unexpected expense arise, you might find you can’t pay it with your card. You could find that you can’t buy a product you urgently need. Or you could miss out when a stock you’ve been watching hits your target price to buy. Or an important automated payment could fail.

What to look for when investing with debit card brokers

Are you considering opening a brokerage account that will work with your debit card? If so, there are a few things you should consider before you actually open the account.

Low fees

So you’re going to open one or multiple brokerage accounts and buy stock with your debit card. One thing you should do is make sure that the fees are kept low.

Investment fees are a standard feature of all investment platforms. They may vary from one platform to another. But the variation is usually small. Other fees may vary considerably. Most brokers will have standard fees. Monthly maintenance fees are an example. These fees can eat away at your investments. You should make sure that your account value isn’t dropping because of high fees. Investment accounts you use for trading stocks should only lose a lot of value when you make bad investments. If they’re losing significant value due to fees, find other accounts.

There’s another source of fees you should watch out for: your investments themselves. Investment products can have high fees attached to them. A financial firm seeking to make more money may promote products with high fees. These may include mutual funds. Such products may benefit the firm but be to your account’s detriment. A firm may try to sell securities to the public that, though they have a good return, also come with high fees. This means they are not a great investment for most people. The best brokers will provide transparency on their fees. And their expenses will be indicated on their website or app.

Ease of use

A big reason why people want to use a debit card to buy stocks is for ease of use. Doing so is faster, simpler, and less of a hassle. The best brokers make it easy to buy individual stocks and mutual funds. They make buying other investment vehicles easy, as well. Don’t settle for anything less.

Good reviews and reputation

When you open a new brokerage account, make sure that the company has good reviews and a solid reputation. Be especially sure to do this if the account’s with an online company or investment app.

Comparing brokers or investment platforms

Here are some things to look for when investment platforms and other brokers:

  • Make sure they have an SEC-registered investment adviser. This adviser can answer questions you might have and offer financial advice.
  • Makes sure they have helpful and responsive customer service.
  • Make sure that the company offers products that work for you and your risk tolerance.

The last point in this list is crucial. Not all investors are alike. Neither are all brokerages. When it comes to investing, it’s important that investors find compatible brokerages. Makes sure you choose a brokerage that suits you.

In addition to being compatible, your brokerage needs to be trustworthy. The funds that you put into your account are just that: your funds. And, obviously, you don’t want to keep your funds with anyone you don’t trust. Neither do you want to keep your money anywhere where you don’t feel it’s secure.

If a brokerage enables you to purchase stocks with a debit card, that’s a good thing. But it doesn’t mean the brokerage is right for you. The investments offered need to suit your temperament and objectives. The resources and services need to meet your needs. And you need to be able to trust your account will be secure.

The ideal investment platform (broker)

Ideally, the platform through which you purchase stocks with your debit card will:

  • Be able to offer some investment advice.
  • Align with your investment objectives.
  • Have additional perks that you can utilize.

Some Frequently Asked Questions

A few questions get asked often enough to merit special mention. Here they are:

FAQAnswer
Can I buy stocks with a debit card?Yes, you can. Not all brokers support this yet, though. Is this an important account feature for you? If it is, make sure you find out if a brokerage supports it before you sign up for an account.
Can you buy stocks with a debit card on Robinhood?Not officially. As of September of 2021, Robinhood requires the routing and account number for a bank account. The company provides no way for you to fund your account using debit card information. That said, some prepaid cards have routing and account numbers associated with them. So it should be possible for you to fund your Robinhood account from your prepaid balance. Check out your card account details to see if your prepaid card supports this. If the card promotes your ability to set up direct deposits to the card, such as from an employer, it probably does.
Does Public accept debit cards?Yes. You can now fund your Public brokerage account directly from a debit card. Public has set this up in cooperation with Wells Fargo and PayPal’s Braintree. You can deposit up to $1,000.
What brokers allow debit cards?This is constantly changing. The best thing to do is compare brokerage account ratings and reviews and look over our best-brokers listing. Once you’ve selected a few brokerages that sound like good matches, go to their sites and do some research. Find out what funding methods they currently support and what new methods they plan to add in the future.

Key takeaways

  • Yes, you can buy stocks with your debit card. All you need is the right brokerage account.
  • New trading platforms like Public.com allow investors to purchase stocks using a debit card. So do more traditional institutions like banks, such as TD Bank.
  • Pay close attention to fees. This includes fees for brokerage services, trading, and your investments themselves. Don’t stay with a brokerage or platform where fees are too high.
  • If you are new to buying stocks, you may want to choose a trading platform that offers access to experts that can provide financial advice. Often, it’s best to treat investing as a team sport.

Bottom line

Using a debit card to trade stocks is more than just possible. For the average person, it’s a great way to begin buying stocks. You just need to find the right place to open your account. There are plenty of firms you can use to help you achieve financial freedom or other financial goals. To make sure you choose the one that works best for you, research your options carefully before opening your account.

Article Sources & Additional Reading
  1. 10 Things You Didn’t Know About Using Debit Cards — SuperMoney
  2. Automated Clearing House — Bureau of the Fiscal Service, U.S. Treasury
  3. How Do Prepaid Debit Cards Work? — SuperMoney
  4. How to buy stock & ETFs with a debit cardPublic.com
  5. Link Your Bank AccountRobinhood
  6. Understanding the overdraft “opt-in” choice — CFPB
  7. What is Debit Card Funding?Public.com
  8. What Are the Advantages of a Debit Card? — SuperMoney
  9. Debit Cards That Build Credit – 3 Ways a Debit Card Can Help You — SuperMoney