How do I Buy Cryptocurrency with a Credit Card ?
There's a lot of talk about cryptocurrencies these days, so you might be thinking about using your credit card to get in on the action. Purchases of digital currency using credit card accounts are, unfortunately, somewhat complicated. However, difficulty alone is not the only reason to think twice before buying Bitcoin. Before you use your credit cards to invest in bitcoin, here are some things to keep in mind.
Buying cryptocurrency using a credit card is possible
It's possible to buy Bitcoin and other cryptocurrencies with a credit card, but it's not an easy process.
One of the first steps is to locate a bitcoin trading platform. Like a stock market, this company makes it easy to buy and sell cryptocurrencies. An exchange that accepts credit card purchases is also required. Credit card purchases are not allowed on several of the most popular exchanges. Credit card transactions on crypto exchanges are subject to additional fees, which can be as high as 3 percent.
Your card issuer may still be an issue even if you are ready to pay the exchange's fees to use your credit card. Most major credit card issuers have banned bitcoin purchases.
Why? It's common for card providers to deny crypto purchases for a variety of reasons, including:
When it comes to cryptocurrency, there's a lot of uncertainty: Bitcoin's price has fluctuated wildly over the past few years. Similar (albeit less well-known) histories have been found for a plethora of different cryptocurrencies. That volatility makes cryptocurrency stocks extremely hazardous, and banks are infamous for their aversion to that kind of risk. Your credit line, or "their money," can't be used to make risky purchases.
Lack of regulation: Unlike most financial goods, Bitcoin is subject to relatively minimal regulation. A product that is already high-risk is made even more so by the lack of regulation. It can also imply legal complications, another thing that banks really don't like.
The fact that cryptocurrency can be exchanged for real money is another reason why card issuers are wary of it. Potential money laundering, tax evasions, and other legal difficulties may arise as a result of this. Many card issuers will not enable you to purchase money orders for the same reason.
If you're looking for a credit card company that doesn't outright deny bitcoin purchases, you'll have to do some searching. When searching for an issuer that allows you to acquire cryptocurrency, be prepared to pay for it once again.
Thirdly, do you recall? When using a credit card to buy cryptocurrency, the transaction is treated as cash advance. There may also be a cash advance fee on top of the credit card processing cost from the exchange, which might add another 3% to 5% every transaction. To make matters worse, as soon as you receive a cash advance, you'll be charged with interest at a rate that's greater than the industry average.
How to buy crypto with a credit card ?
You may buy cryptocurrency using a credit card just like you would any other online products and services.
Find a credit card company that accepts cryptocurrency purchases.
Look for an exchange that accepts credit card payment method.
Make a crypto purchase.
Finding a credit card issuer and a cryptocurrency exchange that enables such transactions will likely be the most difficult point, as previously mentioned.
The purchase can be made once you have selected a credit card and a cryptocurrency exchange. Depending on the platform, the exact steps will be different. Start by registering for an account on the exchange. Next, select the currency and quantity you desire, and then instruct the exchange where to transfer your funds. In the final step, you'll enter your credit card information and finalize the sale.
For this reason, you need make a payment as soon as you receive your cryptocurrency, regardless of whether you used a credit or debit card. Your credit card interest will be reduced as a result of this.
Pros & Cons: Using a Credit Card
Using a credit card to purchase cryptocurrency has a number of drawbacks. In fact, there are so many disadvantages that any advantages are nonsense:
Possibly won't be able to get a bonus.
Credit card sign-up bonuses may not be counted in this case.
Many credit card safeguards won't be available to consumers.
Using a credit card, for example, is a great way to rack up rewards. If you use a credit card to buy cryptocurrency, you may not be eligible for credit card rewards because most issuers consider them as cash advances. In the same way, cash advances don't go toward the spending requirement for a sign-up bonus, so you won't get a welcome bonus.
As a result, many of the safeguards that ordinarily apply to purchases made with a credit card are no longer applicable. In other words, you won't be able to get your money back if your cryptocurrency loses value.
There are also, of course, a plethora of fees. To use your card on the crypto exchange, you'll be charged an additional 3% or more, on top of the transaction fee. Finally, the credit card company will likely charge a cash advance fee of at least 3 percent, as well as any interest that accrues before the transaction is paid in full. In other words, just by using your card, you're shelling out 6% or more in fees.
Aspects to take into account
If you're going to use a credit card to make a cryptocurrency purchase, you should keep in mind the inherent risk of using a digital currency. Cryptocurrency has evolved from a niche novelty to a trading floor buzzword in the last five years or so. One of the reasons Bitcoin became so popular so quickly was because of its volatile character.
If you use a credit card to buy bitcoin, you're essentially taking on debt for an investment that has a very low probability of success. You'll still be responsible for your credit card debt if that investment fails. Interest and other fees might further add to the cost of your initial purchase, making it difficult to repay.
According to how much crypto (and how many associated fees) you charge, your credit utilization (the total amount of available credit you're utilizing) could rise significantly. Credit rating algorithms and issuers alike should be on the lookout for high use. Your credit score drops as your credit use ratio grows.