Paying your share purchases with credit card!

Hong Leong Bank & HLG Securities offer Mastercard credit card that allow their clients to settle share purchase via credit card. At first glance, it seems to be a revolutionary concept. Using credit card to pay for share purchase actually extends your settlement days from T+3 to as long as T+50 days!

On a closer look, the handling fee is 1.5% of the settlement value. So beside paying 0.6% normal brokerage charge, you will suffer another 1.5% for a financing period stretched from 20 to 50 days. (If the T+3 settlement day falls right after your credit card statement day, you will have 50 days before the due date of credit card payment. If the T+3 settlement day falls right before your credit card statement day, you will have 20 days before the payment dues.)

So, 1.5% for 20 days to 50 days. A quick calculation shows that the financing cost ranges between 11.0% (1.5%/50 x 365) to 27.4% (1.5%/20 x 365)! It is extremely expensive even compare to share margin financing which usually ranged between 5% to 12%.

If you have already used share margin financing or personal loan to pay for your trading activities, stick to it. This credit card deal is really not a good deal...

More about share margin financing...actually our view is that DON'T borrow money to invest.

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