Everyone seemed to want in on cryptocurrency, just as gold did in the 1850s and dot-com stocks did in the 1990s. It is possible to buy cryptocurrencies with a credit card, but doing so might be risky financially.
Cardholders can expect costs from both parties in a transaction combining cryptocurrency and credit cards because of the high-interest rates and unpredictable currency values, plus they run the danger of losing their money very rapidly.
How to Use a Credit Card to Buy Crypto?
If you wish to acquire cryptocurrency using a credit card, you should be informed of any applicable costs in advance and be ready to factor them into the price of converting dollars into coins.
This includes charges from your credit card company as well as the cryptocurrency exchange.
However, if the credit limit on the card does not allow you to make a purchase and you tell yourself “I need money desperately” you can always take a loan for this matter. But do not forget to carefully read the terms of the loan and the terms of its return.
Here are some measures to follow if you decide you don’t mind the cost and want to purchase cryptocurrency using a credit card so that you are aware of the additional fees you’ll incur:
Find out about cash advance fees from your credit card provider.
To find out how much you’ll pay in cash advance fees and the APR that will be applied to your balance when you use your card to buy cryptocurrency, consult your card agreement or give the number on the back of your card a call.
It should also be remembered that you cannot pay with bitcoin everywhere. To have information about all the intricacies of cryptocurrency purchase operations, the Federal Trade Commission conducted a review and study.
Calculate the number of exchange costs you will pay. If you’ve decided to invest in cryptocurrencies, it’s crucial to pick the exchange where you’ll purchase (and maybe keep) your coins based on aspects like costs, investor tools, accessibility, and most crucially, security.
If you decide on an exchange that also accepts credit cards, seek a page on the exchange’s website that explains in detail the charges you will be responsible for when using a card.
Use your credit card to fund your account and then buy cryptocurrencies. You can explore cryptocurrencies and invest when you’re ready once your exchange account has been filled with the funds you intend to spend for cryptocurrency.
Largest cryptocurrency exchanges based on 24h volume in the world on September 29, 2023 (in billion U.S. dollars)
Finish off the outstanding balance on your card. When you make the purchase, your cash advance will start to accrue interest; thus, you should have a strategy in place to pay the sum off as quickly as you can to prevent paying more interest.
Who Allows your Card Purchases of Cryptocurrencies?
Here are the guidelines for various significant issuers as of April 2023 regarding crypto purchases:
- American Express: Subject to a few rigorous conditions, allows purchases on select exchanges
- Bank of America: prohibits the use of any of its cards for bitcoin purchases.
- Barclays: None of its cards allow users to buy cryptocurrency.
- Chase: No one of its cards allows buying of cryptocurrencies.
- Discover: None of its cards allow buying of cryptocurrencies
- Wells Fargo: prohibits the use of any of its cards for cryptocurrency purchases.
When Using a Credit Card to Buy Cryptocurrency Is Not Permitted?
Numerous significant U.S. credit card issuers forbid cardholders from using their cards to buy cryptocurrencies.
According to reports, Citibank, for instance, prohibited cardholders from using their cards to buy Bitcoin and other cryptocurrencies, maybe out of concern about their volatility and the possibility of fraud.
In some cases, if a cardholder tries to make a bitcoin transaction, the credit card company may even charge cash advance costs.
However, even if your credit card does permit purchases of cryptocurrencies, you should be aware that some bitcoin exchanges, including eToro and Coinbase, will not take your cards as payment.
Additionally, the exchangers that could let you use a credit card won’t enable you to make a purchase right away since they need time to verify that the transaction is legitimate and not being used illegally.
Where Else Might You Purchase Cryptocurrency?
Again, it is possible to purchase cryptocurrencies using a card, but the majority of sizable U.S. credit card issuers, as well as several significant bitcoin exchanges, do not permit it.
An electronic transfer from a bank, accomplished by connecting a bank account to the exchange or by setting up a wire transfer, is a preferable and more typical way to pay for cryptocurrency transactions using dollars.
You may also use other cryptocurrencies to pay for cryptocurrency purchases on several exchanges. For instance, you may exchange your Bitcoin for Ether.
What Kinds of Credit Card Fees Are There?
Fees for Transactions
A small fee is charged by cryptocurrency exchanges for transactions made using credit or debit cards. Generally speaking, this is more expensive than other commonly used payment methods like bank transfers.
Payday Loan Costs
You borrow money from your credit card company directly when you receive a cash advance. Cash advances are often used to facilitate card bitcoin transactions.
American Express, for instance, classifies cryptocurrency transactions as cash advances. You will have to pay $5 or 10% of the transaction value in this case, whichever is higher. Therefore, if you spend $1,000 on cryptocurrencies, your card company may charge you a fee of $100.
Fee for Foreign Transactions
Users are likely to pay a foreign transaction charge when purchasing bitcoin with USD using a credit card on a site located outside of the US.
This scenario also applies to customers using locally issued cards to purchase cryptocurrency using other fiat-issued currencies. Typically, foreign transaction costs are 3% of the total transaction cost.
The use of a credit card is one of the various ways to buy bitcoin. Despite having higher transaction charges, using credit cards is quick, convenient, and doesn’t require having cash on hand.
Users who want a more cost-effective approach could consider making a bank transfer. In contrast to cards, the processing time for bank transfers might take several days.
Before selecting a payment method that suits you, you must educate yourself on the advantages and disadvantages of each.