Bitcoin is the world’s largest and most popular cryptocurrency. The digital asset is not foreign to attention and has in ways more than one proved doubters wrong by regularly hitting all-time highs and most recently even surpassing the market cap of silver.
Demand for the apex cryptocurrency is at its peak with the launch of spot BTC exchange-traded funds (ETFs) in the United States, which are issued by some of the biggest players on Wall Street like BlackRock and Fidelity.
Many retail, institutional, and crypto investors are rushing in to buy Bitcoin through exchanges and brokerage firms. So genuinely, it begs the question in one’s mind, “How can I buy Bitcoin using a credit or debit card?”.
This article is a guide on all the things that you need to know about buying Bitcoin using credit or debit cards.
So, without further ado, let’s get started.
How to Buy Bitcoin Using Credit or Debit Card?
Buying Bitcoin using a bank-issued debit or credit card is a rather straightforward process if your exchange or the country you reside in supports it. However, there are several factors that you must consider before going forward to ensure that you are doing things right.
The first thing to make sure of is that you possess the card number, card verification value (CVV), and expiry date of the credit or debit card you will using for the purchase. These details will be required on the crypto exchange’s checkout page to buy your desired Bitcoin.
Now, let’s look at the steps you need to take to buy Bitcoin with the card.
1. Research Your Card
Should you decide to purchase Bitcoin with a credit or debit card, the first thing to do is to research whether the card and payment company issuing it support the purchase of cryptocurrencies. This is because not every credit or debit card issuer allows customers to buy Bitcoin.
For your reference, here are the card companies that support crypto purchases:
Another point to keep in mind is that each of these cards charges different fees for transactions involving cryptocurrencies. Therefore, researching the payment structure of the cards will give you an insight into the fees each issuer charges.
2. Check Whether Your Exchange Supports Card Payments
While some prominent exchanges like Binance, Coinbase, or Kraken support using credit and debit cards for purchases, not all of them offer the convenience. Even on the platforms that do, it may take longer than usual to process and validate the transaction.
Exchanges that don’t offer support card purchases simply use peer-to-peer (P2P) means for the transfer of Bitcoin.
3. Link Your Credit or Debit Card to the Exchange
Once you have found the exchange that supports Bitcoin purchases in your preferred debit or credit card, it is time to link the card to your account on the platform. When adding your card do the following:
- Enter your full name as given on the card or bank account
- Enter card details including, card number, CVV, and expiry date
- Enter your billing address, which should be the same as the one for your card
4. Buy Bitcoin
Now head to the search bar on the exchange’s app or website, search for Bitcoin, and select the fiat trading pair you prefer. Once Bitcoin has been selected, enter the amount you wish to buy and choose the option to pay with your credit or debit card.
The exchange will then redirect you to your bank’s one-time password (OTP) transaction page. Once the details provided are verified and the transaction is successful, you will get the Bitcoin deposited in your exchange wallet.
5. Self-Custody the Bitcoin
It is recommended that you move the Bitcoin to a self-custody hot or cold wallet. This is because crypto exchanges don’t offer individual wallet services, instead, they hold the tokens on your behalf. This increases the risk of you losing access to your Bitcoin in case something goes wrong with your account or the platform faces regulatory uncertainty.
Always remember, “Not your keys, not your crypto”.
Factors to Consider When Purchasing Bitcoin With a Credit Card
It’s important to note that when swapping fiat for Bitcoin or any other cryptocurrency, the exchange may charge a fraction of the transaction cost as a fee. In most cases, the exchange charges an additional fee when customers decide to fund their accounts using credit cards.
Here are some things that you need to watch out for when purchasing Bitcoin using a credit card:
Debt
Bitcoin is a highly volatile asset that experiences extreme upward and downward price fluctuations regularly. So, it is considered rather risky when opting to buy cryptocurrencies using a credit card, as you will be indebted to pay the cash spent back to the bank within 45 days.
This means paying exorbitant interest on volatile investments.
Scams
The crypto sector is marred by scams and hacks, and no exchange platform is 100% guaranteed to be safe. If in an unlucky situation, your exchange suffers a security breach, you might have your personal information, including your credit card details, stolen.
Cash Advance Penalties
Similar to using your credit card to withdraw cash from an ATM, your card issuer is likely to view your Bitcoin purchase as a cash advance. Although withdrawing cash via credit card is helpful during emergencies, it has a lot of downsides.
- High Intrest Rates
Compared to regular credit card purchases, cash advance transactions are charged with a higher annual percentage rate.
- Foreign Exchange Fee
If you purchase the Bitcoin on an exchange registered in another country, then a foreign exchange fee may be levied. Usually, credit cards charge a 3% fee on foreign transactions.
- Cash Advance Fee
When you take cash advances using a credit card, the bank charges a fee equalling 3% to 5% of the amount withdrawn. This fee is deducted from your bank account on the card’s billing date.
- Zero Grace Period
Usually, there is a 21-day grace period to pay off your bill before interest is charged. This only works if you pay your monthly due amount in full. However, this does not apply to cash advances as they start to accrue interest from day one.
- Lower Credit Limit
While credit cards have a general credit limit, when it comes to cash advances, there is a separate cash advance limit. This amount will be lower than what is available under the general limit.
- Credit Utilization
Everyday utility purchases or bill payments using credit cards don’t have much of an impact on your credit score. However, cash advance transactions like crypto purchases can swallow your available credit, gravely impacting your credit score.
- No Card Rewards
Maintaining a good credit score using a credit card comes with significant rewards such as cashback offers, travel points, or flyer miles. However, crypto purchases made with a credit card won’t qualify for those rewards.
Some credit card companies are now starting to view crypto purchases in a different light. So, as part of your research, you could call the issuer’s toll-free number and enquire whether a cryptocurrency purchase using their credit card would qualify for rewards.
Conclusion
If you plan on purchasing Bitcoin using a credit or debit card, make sure that your exchange supports such transactions. When it comes to credit cards, you will need to be extra careful and do due diligence before making the purchase. Consider whether buying Bitcoin with your credit card is logical, meaning that you look into the various factors at play such as fees, interest amount, the impact on your credit score, and available limit.
Bitcoin and cryptocurrencies are highly volatile assets, therefore, you should take a calculated approach before investing in them. When buying crypto with a credit card, make sure that you can pay the bill back in whole on the due date. This helps in maintaining a good credit score, which provides you with added benefits.
