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Can You Use a Credit Card to Purchase Cryptocurrency?
Over the last few years, Bitcoin and other cryptocurrencies have been the trendiest investments. With their rise in popularity and the massive potential gains they offer, investors with smaller budgets are also looking for a way to purchase cryptocurrencies. Most investors buy cryptocurrencies through a credit card and use the gains to pay off the debt.
Crypto exchanges have made it easier to purchase a cryptocurrency using a credit card. However, buying digital currency using credit card accounts can be complicated. This guide will walk you through the risks and important factors to consider when using a credit card to buy cryptocurrencies.
Using Credit Card to Buy Cryptocurrencies
Though you can buy cryptocurrency using a credit card, this largely depends on the cryptocurrency exchange platform and your credit card issuer. The first step to purchasing and selling a cryptocurrency is joining an exchange – a platform facilitating crypto transactions.
Moreover, cryptocurrency exchanges allowing credit cards generally charge for the privilege. The fees can add over 3% to your transaction. Even if you pay the exchanges fee to pay through your credit card, your card issuer could still be a problem.
Reasons Card Companies Prohibit Crypto Purchases
Most large credit card issuers in the US prohibit purchasing cryptocurrencies, while others penalize cardholders.
For example, Capital One decided to decline cryptocurrency purchases to protect cardholders from losses, market volatility, and frauds. Credit card issuers block purchases due to the following reasons:
• Uncertainty: Bitcoin has undergone extreme ups and downs in the last few years. This volatility makes cryptocurrency stocks exceptionally risky. As the banks are against these risks, they won’t let you use your credit line to make unsafe purchases.
• Poor regulation: Unlike various other financial products, regulation with cryptocurrency is very little. As a result, more uncertainty is added to an already risky investment. It can also lead to legal complications that banks strongly dislike.
• Cash equivalence: Card issuers don’t encourage cryptocurrency as it can be traded for actual currency. Moreover, it can lead to tax evasion, money laundering, and other legal problems.
Reasons Why You Shouldn’t Use Credit Card for Cryptocurrencies
Besides the fee charged by the exchange for its service, you’re likely to be charged an additional fee if you use a credit card. For instance, you’ll be charged a percentage of the transaction amount to exchange dollars for any cryptocurrency.
Your credit card issuer may also consider the crypto purchase a cash advance, like when you use your credit card to take money out of an ATM
. It can be bad for you as it comes with a cash advance fee which is a one-time fee, usually 3% to 5% of the amount.
Moreover, most cards charge higher interest rates for cash advances than regular purchases. Other issues include lower credit limits, no credit card rewards, and no grace period.
How to Purchase A Cryptocurrency With a Credit Card
Simply follow these steps to buy any cryptocurrency with your credit card.
1. Find an exchange allowing credit card transactions. Based on which one you choose, you may be required to share some personal details to verify your identity.
2. Before going any further, make sure that your card issuer allows crypto purchases. Ask your credit company whether those transactions will be considered cash advances or regular purchases.
3. To enter your payment method, you'll need to input your card details and save them.
4. The next step is to select the cryptocurrency you intend to purchase. Enter the currency you want to use and the amount you wish to buy. Once you set up your transaction, you can go ahead and purchase.
5. You must pay off your balance at its earliest to avoid accumulating interest on your credit card balance. That's because you've already paid a hefty fee for the transaction, and you may be charged a higher cash advance annual percentage rate.
Another way to buy crypto is using credit card rewards. Many credit cards issue rewards in the form of crypto. This enables cardholders to avoid fees that come with crypto purchase transactions.
If you’re interested in buying cryptocurrency, visit Urban Crypto. You can read simplified crypto and Bitcoin guides at their website to get started with Coinbase. Their online platform and the highly-qualified team help you make money online with Bitcoin.
Moreover, you can also go through the crypto news and industry info and beginner's guide to buying cryptocurrency to begin your Bitcoin journey! Visit their website to get all the Bitcoin tax questions answered!
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