In this guide we will talk about how to buy Bitcoin with a credit card and if it is worth it. Currently, most crypto-hungry investors are looking to add BTC to their crypto portfolios right now. Next, we will tell you if it is worth (or not) taking the risk and starting to invest in Bitcoin paying with credit. All set? So we start…
Can I Buy Cryptocurrencies with a Credit Card?
The simple answer is yes, of course, you can buy Bitcoin (or any other cryptocurrency) with a credit card. However, this largely depends on your credit card issuer and cryptocurrency exchange platform.
To buy and sell Bitcoin, you must first join an exchange. This is a platform that facilitates crypto transactions, just like a stock exchange. Many of the most popular exchanges do not allow credit card transactions. For example, one of the largest cryptocurrency exchanges, Coinbase, allows credit card purchases in Europe and the UK, but not in the US.
Likewise, exchanges like CEX.IO, eToro, and Coinmama accept credit card payments in the US, but only Visa and Mastercard. However, the main drawback is not the availability of credit cards as a payment method, but rather the fees involved in buying with a credit card.
For its part, Coinmama charges a transaction fee based on the market rate plus 2%, a commission of up to 3.9%, and an additional 5% fee if you choose to buy with a credit card.
Finally, issuers like Chase and American Express allow you to charge cryptocurrency purchases to your card. However, both companies consider cryptocurrency to be an equivalent of cash and therefore treat the transaction as a cash advance, which comes with much higher interest rates and a 5% cash advance.
Benefits and Disadvantages of Buying Bitcoin with a Credit Card
Among the main benefits offered by this transaction we have:
- Investment without cash. If you want to buy a certain currency before you believe its value will increase, using a credit card can allow you to make the purchase right away.
- Major Rewards. If your card issuer treats Bitcoin transactions like regular purchases, you can take advantage of lower interest rates and earn rewards for your spending. All this is thanks to credit card rewards programs.
Some drawbacks to keep in mind are:
- This is a Cash Advance. You may not be aware of it, but most cryptocurrency purchases can be treated as cash advances by banks. This would lead to higher fees, no grace period for interest charges, and no card rewards on the amount advanced.
- Higher Rates in General. In addition to the potential costs imposed by your card issuer, you may also have to pay an additional fee to the exchange each time you execute a transaction. That means that credit card transactions are only profitable when you buy large amounts.
- Credit Score may be affected. One of the main factors that affect your credit score is the total amount of debt you have. So, putting your card to “great use” is a red flag for the bank. Remember that buying Bitcoin with a credit card only increases your outstanding balance; if you don’t pay it right away, your score could go down.
- Volatile Investment. Because it is about credit and in theory it is “ money that you do not have”. So if you don’t pay off your card balance quickly, interest charges could easily negate any returns; since your purchase will likely be treated as a cash advance and will begin accruing interest immediately and at a higher rate.
How to Buy Bitcoin with a Credit Card?
The process to buy Bitcoin or any other cryptocurrency with a credit card is quite simple. Next, we describe the steps:
- Find the Ideal Provider: Find a Wallet or Cryptocurrency Market that accepts credit card transactions. So your first step is to sign up; Depending on which provider you choose, you may be required to share certain personal information and verify your identity. (If the exchange allows credit card transactions, you will almost certainly need to do this.)
- Talk to your Bank: Double check that your card issuer allows Bitcoin purchases. Before proceeding, contact your credit card company to review every detail. Also, ask if those transactions will be treated as regular purchases or cash advances.
- Enter your Payment Method: Next, you will need to enter your card information and save it as your preferred payment method.
- Configure your Transaction: Select which cryptocurrencies you want to buy, in which currency, and the amount you want to buy. Once you have confirmed all the details, go ahead and purchase.
- Pay your balance as soon as possible: It is important to prevent interest from accumulating on your credit card balance. When it comes to buying Bitcoin with a credit card, the bank may charge the highest APR on the cash advance. Make it a priority to pay off your balance as soon as you have the funds.
One way to avoid high fees when buying Bitcoin with a credit card is to obtain this benefit through your bank‘s Rewards Program. Some credit cards, such as those offered by BlockFi and Gemini, issue rewards in the form of cryptocurrencies.
This allows cardholders to avoid the fees associated with cryptocurrency purchase transactions. The Venmo credit card also recently gave cardholders the option to use their cash back earnings to purchase a cryptocurrency of their choice; it is selected in advance and is automatically purchased at the end of each billing cycle. Once again, fees do not apply to auto-purchase transactions.
Where to buy Bitcoin with Credit Card?
Among the most popular sites on the Internet to buy and sell Bitcoin are:
- eToro: It is the most popular platform, in general, to buy Bitcoin with a credit card. It allows investors to buy Bitcoin with a credit card, bank transfers, PayPal, Skrill, Neteller, and others. For trading, transfers, and conversions of digital assets, the social merchant supports more than 40 cryptocurrencies. The platform has the lowest minimum amounts in the market.
- Binance: It is a crypto exchange market with high liquidity. This means that you can earn Bitcoin in a matter of seconds. It is another of the most popular cryptocurrency exchanges in the world. It outperforms all other exchanges in terms of trading volume, handling billions of dollars. In addition to credit card payments, Binance also offers a variety of payment options, including debit cards, e-wallet options like PayPal, and bank transfers.
- CoinBase: It is the ideal exchange market for newbies or beginners. Coinbase’s minimum deposit is set to $ 2. Also, trading fees are 0.5%; however, there are no fees for initial deposits or withdrawals. Coinbase offers a variety of payment options, including credit cards, wire transfers, and more. Because it includes a mobile app and a separate wallet.
Cryptocurrencies have become one of the most modern investments in recent times. From Bitcoin to Ethereum to Dogecoin, there are hundreds of coins on the market. Although, if you want to buy Bitcoin with a credit card, we must advise you to think twice. Above all, if you do not feel sure that you can pay the balance of your card soon.
As you already know, and following the rise of Bitcoin in the digital asset market, there has been an increase in payment options available to investors. One of these most popular payment options at the time of writing this article is the credit card. The reason? This option is easy to use, cheap and fast. As long as you know how to manage your expenses and have a credit card that treats the transaction as “an expense” and not as “a cash advance”.
Finally, the use of a credit card to buy Bitcoin will depend exclusively on what type of investor you are, the card you have, and the bank that issued it.
Frequently Asked Questions
Can I buy bitcoin with a credit card anonymously?
No. This is illegal and you will not pass identity verification.
Can I buy bitcoin with a prepaid debit card?
Most digital marketplaces will not allow you to use a prepaid debit card. To buy bitcoin with a prepaid debit card, you will need to exchange it for “digital money” using LocalBitcoins.
Is it risky to use my DNI (Official Identification) to be able to buy Bitcoin?
It depends on how much you trust the exchange markets. Like any information you provide online, there is always a risk that it could be hacked or stolen from the website where you registered it.
One thing Bitcoin exchanges have going for them is that because they are constantly under attack, they have some of the best security and protection measures on the internet. There is always a risk with anything related to online information.
Why do I have to buy Bitcoin with a credit card to be able to buy other cryptocurrencies?
This is because most other cryptocurrencies are traded against Bitcoin. The liquidity of the other digital currencies against the US dollar is usually very scarce. But on the other hand, the liquidity against Bitcoin (BTC) is usually very good. So it’s easy to get other coins once you have bitcoins, but it’s not easy to buy other coins without having BTC first.