How To Buy Bitcoin With Credit Card – Bitcoin Magazine – Bitcoin Magazine

Introduction

Surprisingly, the term “credit card” was first used to describe a card for spending in 1887, mentioned several times in Edward Bellamy’s utopian science fiction novel Looking Back.

Although in the beginning the concept was slightly different from today’s and did not involve debt in terms of borrowing from the authorities, credit cards have been around for almost 150 years and will not disappear easily.

People use it for convenience, but often go beyond their means, buying goods and services they can’t afford without going into debt. Those who do not have good money management skills over a long period of time may find themselves in financial trouble if they do not repay their loans on time, as the interest rates can be exorbitant.

Until the Bitcoin standard encourages credit card users to shred that piece of plastic forever and live a debt-free lifestyle, people will continue to spend money they don’t have. Many bitcoiners would argue (sarcastically or otherwise) that the only meaningful benefit of a credit card is to buy more bitcoins.” Joke or not, you should be aware of the trade-offs associated with using a credit card to buy bitcoins, as the extra transaction costs are not worth it.

This article will shed some light on the pros and cons of using a credit card to buy bitcoins and whether or not an alternative option should be considered.

Pros and cons of using a credit card to buy bitcoins

Pros:

Convenience: You can buy bitcoin even if you don’t have cash.
Speed: You can buy bitcoins with a credit card if the bitcoin exchange you use allows it. While bank transfers can take up to two days to process, credit card purchases are processed instantly.
Funds: Credit cards are an easy way to buy bitcoin; however, you have a loan with a financial institution and you should consider that the interest rates and fees involved in the transaction may be very high.
Rewards: If your provider allows cryptocurrency, you can collect credit card rewards, such as cash, travel points or miles.

Cons:

Debt: Aside from high transaction fees, when you buy goods or services with a credit card, you also owe money to a bank or financial institution and agree to pay interest rates that can be very high.
Cash advance: Consider withdrawing cash from an ATM with a credit card: they are more expensive than debit cards. A credit card payment to purchase Bitcoin may be treated as a cash advance by the card issuer, and you should consider the following fees applicable to such service:

Commissions can be as high as 3-5% of the transaction amount;
If you don’t pay your entire monthly credit card bill, the interest APR can be very high;
Loss of grace period, usually 21 days before you are charged interest;
loss of rewards because your card issuer will likely not apply rewards to cryptocurrency purchases as they are considered cash equivalents;

KYC: “Know Your Customer” procedures are strictly applied to bitcoin purchases by credit card, to the point where the card issuer may block your purchase based on bitcoin volatility and the potential for fraud.
Credit score: Depending on your jurisdiction and credit card provider, your credit score may be affected.
High fees: The total amount of fees you have to pay for buying bitcoins with a credit card can be significant.

In the next section, you’ll find more information about the types of fees to consider for both your credit card provider and the exchange you use to buy bitcoin. Remember to keep these things in mind when buying bitcoins with a credit card, as they can make a big difference in the final bill.

Expected payment types

Credit Card Company Fees

If a financial institution or bank allows customers to buy bitcoins with a credit card, they will usually charge a set of fees that are higher than other payment methods. This is because credit card issuers treat the purchase of bitcoin as a cash advance rather than a regular purchase:

Cash advance: commissions can be as high as 3-5% of the transaction amount.

Cash advance interest rate: The APR on interest can be very high, often over 25%, and starts accumulating the day you receive your bitcoin until you pay off the loan. This is in contrast to regular card purchase interest rates, which start charging after a period of three to four weeks, depending on the card provider.

Cryptocurrency exchange fees

While most cryptocurrency exchanges and brokers allow you to buy bitcoins with a credit card, you shouldn’t take it for granted. Many Bitcoin services will not allow credit card purchases due to the chargeback period, given that the credit card transaction can take up to six months to complete.

Below are the fees for services that offer credit card bitcoin purchases:

Commission or service fee: Applying for using a credit card to buy Bitcoin. For example, US cardholders may have to pay an exchange fee of around 3% to buy bitcoins with a credit card.
Foreign Exchange Fee: If the exchange is located outside of your jurisdiction, you may have to pay a foreign exchange fee, typically 3%.


name	Platform	Limits	Fees
Bitstamp	Crypto exchange	$20,000 per month, $5,000 per day or £5,000	5% when depositing fiat currencies or making instant purchases with a credit card
ByBit	Crypto exchange	$10,000/deal	1.1% in the EU, between 2.7% and 3.05% in non-EU countries
Merger	Broker	$20,000/deal	8%
CashApp	Bitcoin Software	$10,000/week	3%
Coinbase	Crypto exchange	$3,000/day (US only)	3.99%
I don’t like it	Broker	$15,000 per month, $5,000 per day	4.9% to 5.9% commission by credit card
Binance	Crypto exchange	BTC up to €5,000 per day and €75,000 per month	3.5% commission or $10 per transaction
In Bitpanda	Broker	Verified accounts allow €2,500 per day and €300,000 per month	1.49%
Paybis	Crypto exchange	$20,000/week $50,000/month	There is no commission on the first transaction. Then it is not clear.
CEX.io	Crypto exchange	There is no daily or monthly limit	2.99% – 3.99% + service fee; 1.49%

How to buy Bitcoin with a credit card

Depending on the jurisdiction or type of cryptocurrency exchange, you may need to go through a verification process before buying bitcoins with a credit card.

Before you can link your credit card to your exchange or brokerage account, you’ll need to open an account with the service provider and verify a method of identification, usually a passport or driver’s license.

Find below the usual steps to buy bitcoins with a credit card:

Register: Most platforms will require you to go through KYC procedures and verify your identity. Only then will you be able to buy bitcoins with a credit card or any other form of payment available.
Link a credit card: After registering and verifying your account, you can link a credit card from the payment settings page.
Set an amount to buy immediately: Some platforms will require you to use your credit card to buy fiat currency and deposit it into your exchange or brokerage account before making any transactions. Others will allow you to deposit directly into your personal wallet with a credit card purchase. Check what options are available with the exchange and make sure you have a wallet address for the purchase.
Select the “Buy with credit card” option. and click “buy”.

Are there better options than using a credit card?

There are better ways to buy bitcoin cheaper and anonymously. Without a doubt, shopping with a credit card is the most convenient way. Still, if you can take your time, you should consider alternatives like bank transfers and even gift cards, prepaid cards, and cash if you want to buy bitcoin anonymously.

Frequently asked questions

How long does a credit card bitcoin transaction take?

Depending on your credit card issuer, this can take anywhere from 30 minutes to a few hours on average, but up to 12 hours if the finance company needs to verify additional ID and bank details.

Is it safe to buy bitcoins with credit cards?

Aside from the typical issues with the risks of using your bank details online, it is safe to use a credit card to buy bitcoins.

Can I fund my bitcoin wallet with a credit card?

Yes, non-government brokers like Coinmama, Coingate and Paybis allow you to buy bitcoin and send it directly to your wallet.

What apps can I use to buy bitcoins instantly with a credit card?

Most apps require you to have a balance with their platform before you can buy bitcoins. However, that balance can be topped up instantly with a credit card, giving you the chance to buy bitcoins immediately afterwards.

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