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Are Forex Account Credit Card Top Ups Evil

In this week’s Wednesday Wisdom we explore a question from a TraderRach reader Robert Nix.  He asks whether forex account credit card top ups are evil.  It’s an interesting question that raises some serious issues.

Let’s explore 3 important aspects about credit card top ups to help expand our awareness and self-evaluation.

Credits Card Top Ups – 3 Big Issues:

1. What’s the rush?

With credit card top ups it’s often the fastest way to have money appear in your forex account to cover a margin call or to extend the amount available to trade.  Credit cards imply a great sense of urgency.

Credit card companies charge a fee for the service so it’s not the most cost effective means to bolster your forex trading account.

If you’re rushing for the plastic to fund your account, maybe it’s time to explore:

i) Have you lost more than you expected? 

One reason for using credit cards is that you may have lost more than you expected.  More than you anticipated a few days back when you could have made other arrangements to top up your account.

If this is the case, why have you lost more than expected?  Is this a one-off event that you could not have foreseen and would not expect to reoccur any time soon?  Or is there something you need to adjust for the future to avoid this event from happening again?

Through evaluation and planning we can improve our future path.

ii) Is the urgent top up a result of poor planning of your account balance needs?

When we trade we should know how much we’re risking and have enough in our account for the potential losses (near term future), margin to hold simultaneous trades open and a buffer.  If our planning is adequate we shouldn’t need to seek desperate credit card top ups to remedy the situation and put our forex trading account right.

It’s best to do additions to our forex trading account in a considered and orderly fashion using the transfer method with the least cost.

2. Are you trading with high interest credit card (borrowed) funds?

There’s good credit use and bad credit use.

Good credit use may be making a credit card top up where you earn some rewards points on a loyalty program and pay the credit balance off on the due date while incurring no interest.  For some people this can make sense when you make use of the credit facility you have and give yourself an extra month to ultimately pay.  All other things being equal, what’s the harm in that?

Bad credit use is topping up the forex trading account with money you don’t have.  What I mean is, you’re squeezing the forex trading account out of the credit you have available to you, but you don’t have the money to pay the credit card off on the due date.  This is where you’re up for the high credit card interest rates while you seek to pay the balance off.

If that’s the case, maybe you should ask yourself if you should even be forex trading at all?  Can you afford it if you lose the money?  Do you have a history of forex trading success to justify the expectation that you will make a return larger than the interest you’re paying and more?  Can you source cheaper funding alternatives or get by without any?

The forex market will still be there tomorrow, next month, next year and so on.  Control your impulses to trade money you don’t have and ensure you have the money to make a real success of it.

Financial stress coupled with the financial risk of forex trading is not a good recipe.

3. Believe me; someone is paying for the convenience.

When a forex trader tops up their trading account with a credit card there’s a credit card processing fee that could be anything from around 2% to 3.5% of the payment.  It’s a convenient service that comes at a price.

i) It’s you, or …

Times have changed and now the customer may be stung the fee, not just the merchant.  But whatever’s the case, someone is paying.

If you get charged the merchant fee for the credit card top up, that’s some precious extra percentage points you need to make from your forex trading before you can break even, let alone, enjoy the good life.

ii) It’s your forex broker (but really you and others)

If the forex broker is absorbing the merchant fee, don’t be fooled into thinking you’re not paying in some way or another.  Every viable business has to recoup their costs and make profits to give the company investors a return for their risk.  If merchant fees are a cost of the forex brokers business, there will be flow on implications where you and maybe others will pay for your convenience.  Don’t be fooled into thinking you’re unscathed.

And the verdict is?

If you’re a forex trader who makes credit card top ups, consider whether it’s working for or against you.  Or are there steps you can take to improve your outcomes?

The credit card top up may not be evil but the surrounding implications, both obvious and hidden, just might be.

Are you making the right choices and acting wisely for your success?

Please share your opinion about the use of credit cards for forex trading in comments below.  We’d all value your opinion.

Please leave a comment below and click the like/share buttons

About Rachel Hunter TraderRachAbout the Author: I’m Rachel Hunter, TraderRach, a Forex Trader who helps traders achieve the life they love with forex.  Be strategic and design your trading business for sustainable success and have fun!  That’s my mission.  Join many traders’ gaining the edge with “10 Powerful Lessons for Forex Trading Success” plus other goodies.  Years of precious learning specially packaged up for you.  My background before trading is as a Chartered Accountant and Chief Financial Officer.   I know what it takes to make a trading business rock on.  It would give me great pleasure to make a difference to your success.

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Categories: Forex Market

4 Responses so far.

  1. robert nix says:

    Hi Rachel :Your thoughtful content will hopefully encourage those who fund their fx trading using credit to think again.Funding by bank wire or by money order if acceptable is not such a bad idea ! A home mortgage loan ,for example should be more than covered by the underlying asset ,but an fx credit card loan is only covered by the trader’s ability or good fortune.’The slings and arrows of outrageous fortune’ will work against the trader (couldn’t resist throwing that in) .



  2. Osmin says:

    When you say in the article “It’s best to do additions to our forex trading account in a considered and orderly fashion using the transfer method with the least cost”.

    For my particular case, the cheapest method was using my credit card to fund my trading account. If I wanted to use a Wire tranfer I had to pay $50.00 for bank fees, the credit card company does not charge me anything, the broker absorbed the merchant cost. As my country is Dollarized I did not pay the conversion fee either.

    I agree with you that I did not have to use money I did not have, I had it in my bank account and I paid it back to the credit card the next month.

    • Hi Osmin

      Thank you for providing a live working example of how using the transfer method with the least cost applies to you. In your case, using a credit card for top ups makes total sense.

      Cheers Rach

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