You’ve heard about cryptocurrency, and you’re ready to buy some. You could wait until your next paycheck to buy bitcoin with a credit card, but why not just get started now? We’ll show you how easy it is to buy cryptocurrency with a credit card legally.
Buying cryptocurrency with a credit card
So, how to buy crypto with a credit card? There are a few things you should know before attempting to buy cryptocurrency with your credit card:
- Cryptocurrency is a type of digital money that can be used as an alternative payment method. Crypto coins like Bitcoin and Ethereum are traded on exchanges, which makes them easy to trade for other assets or currencies.
- A credit card is issued by a bank or other financial institution and allows you to purchase goods or services using borrowed funds from the issuer (the lender). Credit cards generally have lower interest rates than loans from banks or other lenders because they aren’t secured by collateral (your home), but there may be fees associated with using this type of loan product.
- When making purchases using your credit card, you’ll likely see “purchase” charges and “cash advance” charges. The difference between these two types of charges has implications for how much it costs you when buying cryptocurrency with your credit card and what kind of interest rate will apply during the term of your loan agreement with the issuer.
Fees from the exchange
There are three additional fees to consider when purchasing cryptocurrency with a credit card. As professionals at SoFi point out, “It’s important to note that exchanges sometimes change their rules around payment methods and other details, due to the constantly-evolving regulatory landscape.”
- While exchange fees typically vary based on market demand and other factors, they can be as low as 0.25% or as high as 5%.
- Credit card issuer fees will vary depending on your specific credit card provider but generally range between 1% and 3%.
- Payment processor fees are generally around 2%–3%.
Cash advance penalties from the issuer
You may be charged cash advance fees by your credit card issuer, which can add up to hundreds of dollars. Your card company will charge you a higher interest rate on your purchase when it’s categorized as a cash advance, and they may also assess an additional fee that could range from $5 to $10 or more, depending on your card’s terms and conditions.
The issuer also reserves the right to refuse payment for an online cryptocurrency transaction if it has reason to believe that the funds came from illegal activity or were used in connection with any illegal activity. If this happens, all parties must return any funds received during that transaction.
How to buy cryptocurrency with a credit card
- Find a cryptocurrency exchange that will accept your credit card as a payment method.
- Register for an account on the cryptocurrency exchange.
- If required, verify your identity by uploading your identification and other documents to the cryptocurrency exchange.
- Deposit USD into your account by linking it to a checking or savings account or by depositing funds from another cryptocurrency wallet.
Pros of using a credit card to buy cryptocurrency
There are a few reasons why you might want to consider using your credit card to buy cryptocurrency:
- You can get started immediately. There’s no need to wait for bank transfers or even wire transfers, as long as there are enough funds in your account.
- You can buy cryptocurrency with a debit card, too—but only if it has been pre-approved for purchases over $10,000.
While there are disadvantages to using a credit card to buy cryptocurrency, the pros outweigh the cons. If you have any questions about this process, feel free to get in touch with experts at SoFi.