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How to purchase bitcoin using a credit card – and the disadvantages of doing so.

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It is possible to purchase bitcoin with a credit card; however, it depends on the crypto exchange and your credit card provider.

Buying bitcoin using a credit card may result in multiple costs from both the credit card company and the cryptocurrency exchange.

Because bitcoin is such a volatile asset, you may find yourself owing more on your credit card than it is worth if the price falls.

Bitcoin is a cryptocurrency, which means it is a digital form of money that does not have a central government or bank. It was first introduced in 2009. Bitcoin has evolved from a niche payment method to a popular investment alternative in only a few years.

With Bitcoin’s popularity and promise of big profits, investors with smaller budgets seek a way in. For others, purchasing Bitcoin using a credit card seems intelligent to possess the cryptocurrency. Is it possible to buy bitcoin using a credit card?

Is it possible to purchase bitcoin using a credit card?

Yes, you may purchase bitcoin using a credit card. However, it is dependent on which exchange you are utilizing. You can buy bitcoin using a credit card on several crypto exchanges, but it costs.

The ability to buy crypto using a credit card is also subject to the credit card issuer’s policies.

According to Courtney Richardson, Esq., publisher of The Ivy Investor, “[American Express] bans buying money with their card but, for the time being, enables purchases of cryptocurrencies.” Suppose your preferred exchange and credit card provider allows it. In that case, the procedure for setting up these transactions is pretty similar to linking and verifying your bank account through ACH (automated clearing house). 

You can also use other alternative options like PaydayNow.net – No Credit Check platform in purchasing bitcoin, no credit check loan is a quick loan with guaranteed approval within 24hrs.

Is buying bitcoin using a credit card a wise idea?

Buying Bitcoin or any other cryptocurrency using a credit card is not encouraged. Dr. Hans Boateng, the creator of the Investing Tutor, adds, “I prefer folks to acquire bitcoin with cash.” Buying Bitcoin using a credit card is a costly and challenging proposition in which the disadvantages overwhelm the benefits.

Furthermore, credit card companies frequently analyze Bitcoin transactions differently than conventional expenditures. “Purchasing cryptocurrencies is often deemed dangerous conduct, and the credit company may cancel the card or reduce the credit limit,” Richardson continues.

The following are the major disadvantages of purchasing bitcoin using a credit card:

Brokerage commissions

Transaction fees are how cryptocurrency exchanges earn money, but using a credit card might cost you considerably more. If you opt to purchase bitcoin using a credit card, you may be charged broker fees.

Crypto.com, for example, accepts credit cards and costs 2.99 percent for credit and debit card fees, which are waived for the first 30 days.

Fees charged by credit cards

Generally, credit cards regard cryptocurrency transactions as a cash advance, with interest rates ranging from 25% to 27 percent APR with accrual beginning immediately, depending on the card.

This is in addition to the cost of utilizing the credit card issuer’s cash advance. It may be as little as $10 or as much as 3% of the cash advance, whichever is larger.

Fees for international transactions

Your credit card may charge a foreign transaction fee for each purchase if the exchange is situated outside of the United States. This cost might be from 1% to 3% of the total purchase price.

Increase in credit use ratio

Several variables determine your credit score. Credit usage ratio is one of these criteria, accounting for 30% of your credit score. Buying Bitcoin with credit might deplete your available credit, reducing your credit score. Even if Bitcoin’s value drops, your credit usage remains the same.

Quick Tip: Your credit usage ratio is calculated by dividing the amount of revolving credit you’re utilizing by the total amount of credit you have available. It’s a good idea to maintain your credit use below 30% of your total credit limit.

Other factors to consider

Fees aren’t the only danger of purchasing Bitcoin using a credit card; volatility, which Bitcoin is notorious for, is also an issue. “Understanding that Bitcoin is a new technology with a high degree of speculation is the most danger,” Dr. Hans explains.

Bitcoin’s price has fluctuated dramatically over time, negating the supposed benefits of buying crypto using a credit card — and potentially putting the buyer “underwater” if they wind up owing more on their credit card than the commodity is worth. This is particularly risky when interest on the credit card is included, especially if the debt cannot be paid in full and Bitcoin’s price is declining.

While buying bitcoin with a credit card may not be the most excellent choice, there are a few credit cards that may let you earn Bitcoin rewards for everyday transactions. Even if you have a bitcoin rewards card, keep in mind that your advantages may dwindle if you pay late penalties and interest on the amount.

A few credit cards that provide bitcoin-related benefits are listed below:

  • BlockFi Bitcoin credit card: You get a percentage back on all purchases with this credit card.
  • Bitcoin. You may get a greater rate if you spend more than a particular amount.
  • SoFi credit card: In April 2021, SoFi became the first firm to use their SoFi Invest app to convert rewards points straight into bitcoin.
  • Brex credit card: This is a credit card for company owners that pays out up to 8 times in Bitcoin or Ethereum to cardholders.
  • Venmo credit card: According to a recent corporate statement, Venmo Credit Cardholders will be able to utilize monthly cashback in their Venmo account to automatically buy the cryptocurrency of their choosing with no transaction costs.
  • Rewards from Crypto.com Visa: Crypto.com provides a variety of credit cards with prizes ranging from 1% to 8%, depending on the card.

Quick Tip: You may also use your favorite cash-back rewards credit card to purchase Bitcoin with the money you save. Many of the costs associated with credit cards for bitcoin transactions may be avoided if the debt is handled carefully.

The monetary takeaway

While acquiring Bitcoin using a credit card is feasible, considering the asset’s risk and costs, it is not the most prudent financial move. These costs not only lower your prospective profits but may also have a negative influence on your credit score if your transaction is significant. “Buy with cash, dollar cost average, and look at additional methods to be paid in bitcoin,” Richardson advises.