You can make any kind of transaction using a credit card. You can use your credit card to shop, pay utility bills, make travel reservations, pay medical expenses, and purchase goods and services. However, credit cards take a backseat when it comes to investing. Here we will discuss how to pay sip through a credit card and buy mutual funds with a credit card.
Using Credit Cards For Purchases
Credit card purchases are often not permitted for investment types. But some people do. For instance, you can use your credit card to invest in the National Pension Scheme (NPS). In a similar vein, you can purchase gold and pay with a credit card.
Credit transactions are not permitted for stock and mutual fund investments, though. As a result, you are unable to use your credit card to make mutual fund investments, either in a single payment or through SIPs.
How Can I Buy Mutual Funds With Credit Card?
There are several ways to buy mutual funds with credit card Cash Cheques, Demand Drafts, Mobile Wallets, NEFT or RTGS, Debit Cards, IMPS, and Net Banking. While any of the aforementioned modalities can be used to make a lump-sum investment, SIPs require a somewhat different procedure. Let’s examine this.
SIPs, also known as systematic investment plans, are a way to invest in mutual fund schemes. SIPs allow you to invest a fixed sum at predetermined intervals for as long as you like. With as little as Rs. 500 every month, you can begin a SIP.
What’s the Process For SIP Investments?
Typically, you must set up an auto-debit feature on your bank account before starting a SIP. By adding the mutual fund business as a biller to your account, you automate the investment.
After that, the bank will automatically debit your account for the SIP amount and transfer it to the mutual fund firm each time an SIP payment is due. Your SIP then continues while the company invests the money in your folio.
Why Cannot SIP Through Credit Cards?
One kind of credit facility is a credit card. They allow you to pay for products and services and are hence a type of pre-approved loan. SIPs for mutual funds are a type of investing where the money is put down from your savings. Savings are not credit cards. You cannot utilize them to make investments as a result.
The fact that mutual fund SIP transactions are automated through your bank accounts is another reason why credit cards are not accepted. When you redeem, the money is returned to the account where you are investing.
Your bank account is not the same as your credit card account. Although you can link your credit card and bank accounts to automatically pay bills, these accounts are independent. As a result, when you redeem your SIP investment, the funds will be sent to your bank account rather than your credit card account. Thus, you are unable to make SIP through a credit card.
How To Pay Sip Through Credit Card: Indirect Ways
While you cannot make SIP through a credit card to make direct SIP investments, there are several indirect ways to utilize your credit card to make SIP investments. Look at this:
- Money can be added to your mobile wallet using a credit card. Following that, you can use the mobile wallet to make SIP investments.
- As an alternative, you could transfer money from your mobile wallet to your bank account before purchasing SIPs.
Credit cards do, however, have interest fees. If you use a credit card to load money into your mobile wallet, the cost will be added to your credit card account. You would pay a lot of interest if you skipped a payment or paid only the minimal amount required. Additionally, your credit score would suffer.
In the second case, fees imposed by the wallet may apply when transferring money from your mobile wallet to your bank account. This would once more involve an extra fee for making SIP through a credit card.
The two aforementioned possibilities are pricey replacements for SIP investment. Therefore, it is preferable to stay away from these paths and choose a simpler, direct method of SIP investing through your bank account.
Because you may increase card usage and increase your reward points, it is tempting to start SIP through a credit card. However, it is a difficult and hazardous way to invest in SIPs. So, when it comes to SIP investments, stick with the tried-and-true method. Automate your investment process by integrating your SIP folio with your live bank account.
This will guarantee consistent contributions, allow you to take advantage of rupee cost averaging, and encourage disciplined investing, all of which will help you gradually build up a sizeable corpus over time. We hope now you know how to pay sip through a credit card. This article has already explained how to buy mutual funds with credit cards.
Mutual Fund SIP Through Credit Card – FAQs
Q1. Please tell me how to pay SIP through a credit card.
Ans. Gold can be purchased and paid for with a credit card. Credit transactions are not permitted for stock and mutual fund investments, though. As a result, you are unable to use your credit card to make mutual fund investments, either in a single payment or through SIPs. If you desperately want then you can try the alternate way listed above.
Q2. Why you can not make SIP through a credit card?
Ans. A credit card is one type of credit facility. They function as a form of pre-approved loan because they let you pay for goods and services. SIPs are a sort of investing where you contribute money from your savings to mutual funds. You can also find out how to pay SIP through a credit card. Credit cards are not savings. As a result, you cannot use them to make investments.
Another reason credit cards are not allowed is that mutual fund SIP transactions are automated through your bank accounts. When you redeem, the funds are transferred back to the account where the investment is being made. Your credit card account and bank account are two different things.
Even though you can link your bank and credit card accounts to automatically pay bills, these accounts are separate. The money will therefore be transferred into your bank account rather than your credit card account when you redeem your SIP investment. As a result, you cannot invest in SIPs through credit cards.