Cryptocurrency investors have access to a wide variety of digital currencies, crypto trading platforms, and cutting-edge financial tools to make lucrative trades in the rapidly expanding market for digital assets. These options allow investors to maximize their potential returns on their investments.
This article provides a comprehensive guide on how to buy crypto with a credit card in a secure manner and what to anticipate during the process.
The Benefits of Buying Crypto With a Credit Card
Cryptocurrency beginners often find buying crypto with a credit card the most convenient option. This is especially handy if they’re just starting their crypto venture and still don’t own any cryptocurrency they can deposit into their trading account.
Even though credit card transactions have several intermediaries, the whole thing is done within a matter of seconds. Moreover, credit cards are a secure payment method since the card issuer watches for and responds to any suspicious activity.
What If the Crypto Exchange Doesn’t Support My Credit Card?
Many credit card providers don’t allow customers to use their cards for crypto transactions owing to the volatility of the crypto market and the non-regulated status of some crypto trading platforms.
The same goes for crypto exchanges. Not every platform supports credit card purchases, and the fees greatly differ from one marketplace to another.
Therefore, you should research whether or not the exchange accepts your credit card, whether or not the coin you wish to buy can be acquired with a credit card, and whether or not your credit card provider permits crypto transactions before making a purchase.
Alternatively, if you want to buy cryptocurrency but don’t have the cash on hand, you can get a cash advance loan from a creditor and deposit the money in your bank account to buy cryptocurrency via wire or bank transfer.
A Step-by-Step Guide on How to Buy Crypto With a Credit Card
Let’s go through the steps of buying crypto with a credit card.
Choose a Crypto Exchange
First you need to choose the most suitable platform for your purchase. In case you already have an exchange account, but that platform doesn’t allow credit card payments, you can use another trading platform as a fiat gateway.
This will require more time and effort, as you’ll have to create another account on this second exchange, buy some crypto with your credit card, and transfer them to your original crypto account on your chosen platform.
To avoid this, you should always double-check the platform’s credit card and fiat payment options before committing to a new deal.
Open a Trading Account
Once you have chosen a platform, you must open a trading account. Although the registration procedure may differ from platform to platform, some common steps are more or less the same.
At the start, the platform will ask you for your email address, username, and password. After that, you must provide a copy of your government-issued ID, a photo of yourself, and a document attesting to your nationality and current residency. The reason for this is that most platforms adhere to strict AML (Anti-Money Laundering) and KYC (Know Your Customer) regulations.
Usually, this user data should be enough. However, depending on the security methods implemented by the platform, you might have to sit tight for a team of specialized specialists to evaluate your data before you can access its services.
Make a Deposit/ Buy Crypto With a Credit Card
When you complete the identity verification process, you’ll need to make a deposit before purchasing crypto. You can deposit fiat currency or crypto depending on the exchange’s accepted payment methods.
Acquiring cryptocurrencies with a credit card with the “3D Secure” functionality requires no initial deposit. When you buy cryptocurrencies with a credit card with the 3D secure feature, you don’t have to wait for a bank transfer to finish as you would with traditional currency. Don’t hesitate to contact your credit card or debit card issuer to check if your card’s compatible with the 3D Secure protocol.
Finally, follow these instructions to buy cryptocurrency using a credit or debit card:
- Visit the Payment Options tab once logged into your trading account.
- Select the Add Credit/Debit Card option.
- Complete the required fields with your card details. Please note that including a billing address when using a credit card is recommended but not required.
- All done! You’re set to pay for your coins using your credit or debit card.
Credit Card Purchase Fees
Using a credit card to acquire cryptocurrencies can rapidly build up a significant amount of interest charges. In addition to that, the transaction may be subject to a wide range of other costs.
Credit Card Transaction Fees
Typically, cryptocurrency exchanges impose multiple fees for every transaction, including a 1% to 2% transaction fee. But, if you pay with a credit card, they will add a credit card processing cost that may be as high as 4%, and you could be charged an additional fee depending on the cryptocurrency in question. Also, your lender may tack on their own handling fee.
Crypto purchases made with a credit card may be categorized as cash advances by credit card companies that permit their clients to acquire cryptocurrencies. Hence, a cash advance fee is added to all purchases. In most cases, you should expect to pay $10 or 5%, whichever is more.
This cash advance fee is in addition to the fee that you may be charged for using a credit card, which means that you may wind up paying upwards of 9% of the whole transaction in fees, which is hardly worthwhile by any standard.
Exchange Fees
When making a purchase or deposit using a credit card, the cryptocurrency exchange may levy a commission fee and/or a service fee in addition to the regular fee. A number of variables, such as the vendor’s jurisdiction, the transaction’s total value, and the type of credit card you use, may impact the fees that sellers within the exchange impose on the crypto investors when they make a sale. This fee may vary from exchange to exchange.
Foreign Transaction Fees
If the seller is located in a different country and the credit card that you used to make the purchase levies costs for making international transactions, then it is possible that a foreign transaction fee will be added to each cryptocurrency purchase that you make with a credit card.
The Disadvantages of Buying Crypto With a Credit Card
One of the most useful functionalities of a crypto trading platform for beginners is enabling them to purchase crypto with their credit cards. Buying cryptocurrency with a credit card is possible, but doing so involves some degree of financial risk.
In general, cardholders should anticipate expenses from the exchange and the third-party payment processor that connects cryptocurrencies and credit cards. Also, there is a danger of immediate financial loss owing to the inherent volatility of cryptocurrencies, and interest rates are also likely to be higher.
Specifically, you might not be able to use your credit card on some exchanges to buy cryptocurrencies. If you decide to use a platform that supports these deals, you should know there might be additional charges.
Credit card payment processing companies typically treat crypto transactions made with a credit card as advance payments. Advance payment is essentially borrowing funds from your credit card issuer. As a result, the transaction you make with your credit card may be subject to high-interest rates and other fees.
You will likely incur costs from both your credit card company and the currency exchange for purchasing cryptocurrency using your card. Using a credit card to make your crypto purchases can be convenient, but it would also be smart to calculate the whole cost of each transaction and weigh the potential financial gain (or losses) before putting any hefty charges on the card.
Conclusion
Although it can be highly convenient and fast to obtain your first crypto with a credit card, there aren’t many other benefits from using this payment method for you crypto purchases. It is inadvisable to take on more debt to finance an investment in crypto due to the high potential for loss associated with this asset class. As a corollary, it often comes with a hefty price tag. Literally.
It is common practice for platforms that accept payments via credit card to throw on additional costs for credit card transactions. Moreover, given that credit card issuers sometimes interpret purchases of cryptocurrencies as cash advances, you should anticipate being levied a greater rate of interest, too.
Because of this, the value of a solid investment can decrease, or the amount of return on the investment might be significantly reduced, both of which are undesirable outcomes of your crypto trading venture.