How to buy cryptocurrency with a credit card
The cryptocurrency market has taken off so suddenly in recent months that it caught many by surprise. Some are watching helplessly as the price of bitcoin and other digital currencies climbs higher and higher, but you could tap into the market by using a credit card. Many exchanges, like OKEx, do allow investors to buy cryptocurrencies using a credit card.
The benefits of using a credit card to buy cryptocurrency
While there are many things to keep in mind if you decide to buy cryptocurrency using a credit card, there are also some benefits to doing it that way. For example, some exchanges allow you to purchase digital currency instantly when using a credit card instead of waiting until the money is transferred into your account. It’s a much more straightforward and pain-free process.
Additionally, you can still get in on cryptocurrency even if you don’t have the cash to invest right now. If you believe strongly in the future of digital currencies, you might want to get in now before you think the price will go up even further, and a credit card will let you do that.
How to buy cryptocurrency using a credit card
If you’ve decided to move forward with using a credit card to buy cryptocurrency, you’ll have to sign up for an account with a crypto exchange. The process is as simple as logging into your account and choosing a credit card as your payment option to buy the digital currency.
Before you sign up for an exchange with the intent of using a credit card, you should make sure your card issuer allows cryptocurrency purchases. Many of them will block such purposes for various reasons, such as fraud and the high risk involved with the purchase. For example, Capital One doesn’t allow its credit cards to be used to buy cryptocurrency, although American Express does. Many smaller banks haven’t yet made any official ruling on whether their cards can be used to purchase digital currencies.
It would help if you also took note of the fees associated with the purchase. Most exchanges charge higher percentages for using a credit card to buy cryptocurrency than they do for funding the purchase with a bank account. However, it might be worth the higher fee if you think the cryptocurrency will increase in price before money would hit your account from a bank.
Keep these caveats in mind
There are many other things to remember when it comes to using a credit card to buy cryptocurrency. For example, most people don’t realize that when they buy digital currency with their credit card, it’s treated as a cash advance because they are getting money from the card, just like a cash withdrawal. American Express treats all crypto purchases as a cash advance.
There are a few issues with the purchase being treated as a cash advance. For one thing, the card issuer will charge a cash advance fee in addition to the fee charged by the crypto exchange. The standard is generally $5 or 10% of the amount, whichever is higher. Many card issuers also charge a higher interest rate on cash advances, and there’s no grace period, which means interest starts accruing from day one.
Using a credit card also means you’re buying cryptocurrency using debt. If you feel the payoff will be massive, then it might seem like it’s worth the extra expense. Just keep in mind that all those fees come off the profits you will make if the digital currency price rises. It’s generally best to avoid buying any investment using debt, but you may feel like you need to strike while the iron is hot.
Using a credit card to buy cryptocurrency is risky, but sometimes high risk comes with even greater reward. Just be sure to do the math ahead of time to know what you can afford to lose. Good luck!