cryptocurrency: cryptocurrency purchase transaction with a credit card
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Can we buy cryptocurrency with a credit card?

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Buying bitcoin or other cryptocurrency with a credit card is possible, but it can be difficult and not advisable.

If you are used to using a credit card for all your purchases, you may be surprised to learn that buying bitcoins and other cryptocurrency may be prohibited. If you try, you may be limited in two ways: by the exchange where you try to buy the cryptocurrency or by the issuer of your credit card.

Some large cryptocurrency exchanges, such as Coinbase, do not accept credit cards. Coinmama and CEX.io say they accept credit cards, but only Visa and Mastercard. And even in this case, this does not mean that your credit card company authorizes it.

Most major US credit card issuers do not allowPurchase of cryptocurrency, while others penalize cardholders with fees.

Even if you can use a small bank's credit card, for example, to exchange dollars for bitcoins, you may not wish. And for what it is worth, we do not recommend it.

This is why:

In addition to the fees the scholarship charges for its service, it may charge additional fees for the use of a credit card. For example, the exchange may charge you a percentage of the amount of the transaction to exchange dollars for bitcoins or other cryptocurrency.

Coinmama, for example, exchanges eight cryptocurrency, including bitcoin. Coinmama requires a minimum purchase of $60 and charges a 5.9 per cent transaction fee, plus an additional 5 per cent charge for credit card purchases. So, for every $100 of cryptocurrency purchased, you pay $10.90 if you buy by credit card, which leaves you only 89.10 dollars. If you consider buying as an investment, you would have to get a 12% return to balance.

Penalties for advances of funds from the card issuer

The issuer of your credit card is likely to consider the purchase of cryptocurrency as an advance of funds, as if you had used your credit card to withdraw money from an ATM.

This is bad for you because it is probably accompanied by the following disadvantages:

  1. Prepayment of funds. This is a one-time charge when you take your advance, usually between 3% and 5% of the amount. For example, if you make an advance of 200 funds $costs from 6 to 10 $ will be added to your account balance.
  2. Higher interest rate. Many cards apply an annual percentage rate higher for cash advances than for regular purchases.
  3. No grace period. If you pay your balance in full each month, your credit card usually gives you a grace period of at least 20 days to pay your purchase before interest is charged. On the other hand, cash advances begin to generate interest on the first day.
  4. credit limitlower. Some credit cards have a separate credit limit for cash advances, which is below the overall credit limit.
  5. No credit card rewards. If the issuer of your credit card considers a purchase of cryptocurrency as a cash equivalent, your expenses will probably not qualify for rewards, such as cash discounts, travel points or miles. Similarly, they will not be included in the expenses required to obtain a membership bonus.

Again, it depends on the card issuer if a purchase of cryptocurrency is considered an advance of funds. Before making a purchase, you should call the number on the back of your card and ask.

  1. Exchange charges. If the stock exchange is located outside the United States, you may have to pay a foreign exchange fee if your credit card collects it. These costs are generally 3%.
  2. Scams. If you are not careful about choosing a reputable currency exchange, you may have your personal information stolen, including your credit card number.
  3. Debt. If you use a credit card for debt to buy cryptocurrency, you take a high risk. You will pay exorbitant interest on a volatile investment.
  4. Use of credit. Making big purchases of crypto uses your available credit, which is negative for your credit scores.

Crypto as a credit card reward

Some credit cards offer cryptocurrency as a reward or as an option for the exchange of rewards. The options are expanding rapidly, but the first to enter the market are as follows:

  1. SoFi credit card.
  2. The Brex card.
  3. The credit card Venmo.
  4. The BlockFi Rewards Visa® Signature credit card.
  5. The Gemini credit card.
  6. The Bitcoin Rewards Upgrade Card.

In a misguided way, these types of products could be a method of using a credit card to earn bitcoins.

You could also settle for a cash back credit card and use that money to buy cryptocurrency on your own terms and schedule.