Credit cards make it easy for you to buy crypto instantly. However, it’s important to know the risks associated with using your card for cryptocurrency purchases.
Credit card companies treat cryptocurrency purchases as cash advances, which come with higher interest rates and fees. So, if you’re considering buying crypto with your credit card, you need to make sure that it’s allowed by your card issuer and the exchange.
Benefits
A credit card is one of the most convenient ways to buy bitcoin. However, there are a few disadvantages to buying crypto this way, including fees and volatility risk.
Most major credit card issuers, like Bybit https://www.bybit.com/en-US/ and U.S. Bank, declined to comment on their policies regarding the purchase of cryptocurrency with a credit card.
Moreover, your credit card issuer may consider your crypto purchase as a cash advance, which means it’s subject to a higher interest rate. This can lead to significant costs and losses if you don’t pay off your balance immediately.
If you want to avoid these costs, you can use wallets or bank transfers instead of using your credit card. However, these methods are often slow and expensive if you’re buying crypto for long periods of time.
Fees
You can buy cryptocurrency with a credit card if you have an account on a crypto exchange that accepts the payment method. However, there are some fees to keep in mind when making a purchase using your card, including those from the exchange.
Cryptocurrency exchanges charge a fee to process your card’s payment, which can be upwards of 4%. This can add up quickly when you’re buying a large amount of cryptocurrency.
Some exchanges also require verification of identity before you can make a purchase. This helps prevent fraud and comply with federal regulations.
Another potential fee to watch out for is foreign transaction fees, which are typically charged by your credit card issuer. These fees can be up to $30 for every $1,000 worth of currency transferred.
Several major credit cards have banned the use of their cards to buy cryptocurrency, and some smaller credit unions have done so as well. You may be able to find an alternative credit card that permits crypto purchases, though, so check with your issuer first before you start shopping for one.
Convenience
One of the main benefits of using a credit card to buy crypto is the convenience it offers. This is especially true if you don’t have cash on hand to buy cryptocurrency.
However, there are also a number of disadvantages associated with buying cryptocurrency with credit cards. For starters, you’ll typically be subject to a cash advance fee and higher interest rates than normal purchases.
If you’re not careful, these fees could put you in a bad financial situation and affect your future finances. In addition, many card issuers do not allow cryptocurrency purchases.
Moreover, they usually classify these transactions as cash advances which come with higher interest rates and a 5% cash advance fee.
This is why it’s important to find a credit card that allows you to make crypto purchases without incurring these fees. Additionally, check if your credit card issuer offers any other benefits such as rewards on your spending.
Security
The most secure method of buying bitcoin with credit card is to use an exchange that encrypts data transfers. You should also check whether the platform supports 2-factor authentication to increase security even further.
Most platforms require you to sign up with an email address and a password before you can buy crypto using a credit or debit card. They also have a Know Your Customer (KYC) process that ensures you are an individual who is authorized to use the credit card.
These processes take a few days as the banks must check there is no fraud and that the identity of the buyer matches what’s on file with the bank. Once this is complete, you can buy with a credit card on most crypto-to-fiat exchanges.