Can I Pay Mutual Fund SIP with Credit Card?

Can I Pay Mutual Fund SIP with Credit Card?

Recently a reader has asked me the above question. Well, Technically speaking, the answer is Yes. You can pay your mutual fund SIP with a credit card. Simply withdraw money from your credit card and pay it as your mutual fund SIP.

But well, logically it’s not worth.

This is because, “There is no meaning of doing an Investment with Borrowed Money.”

Remember, the basic principle of Investment, “You Should Never do Investments with Borrowed Money.”

Because if you do investment with borrowed money than you will have to pay the interest rate on it. Now, some sophisticated investors do this say for example, Hedge Fund Managers. They take position in the investments with borrowed money. But well, the return is in 3 digits.

Now, Equity Mutual Funds can give you anywhere between 10-15% per annum return from any stock exchange in the world in the long run. And the rate of interest of credit cards is anywhere between 36-50% per annum. So it’s an insanity to invest borrowed money that has interest rate of 36-50% per annum to earn 10-15% return in the long run.

If the end return is 360-500% like hedge funds, than the scenario is different. But in your case, this is not the thing that you are going to make 3 digit return at the end. So borrowing from credit card is a bad idea. Rather than that, it is advisable to default one SIP Payment. Because by missing one SIP Payment, at least you won’t be in Debt at the end.

So forget the idea of paying your mutual fund SIP with Credit Card.