Acquiring cryptocurrencies requires at least one transaction of fiat currencies for cryptos. After that, you can use the purchased crypto to start exchanging.
You can buy crypto in several ways. Bank transfers and debit cards are common choices. But what if you want to use a credit card?
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Can You Buy Crypto Using Your Credit Card?
Yes, you can usually buy crypto using your credit card.
Credit cards are an accepted payment method on platforms that sell cryptos. Whether it’s a centralized exchange or anywhere else, they likely accept credit cards. If you have a Visa or Mastercard, you’ll certainly have no issue using it to acquire crypto. The only two questions are:
- Will the particular seller you’re looking at accept your credit card?
- Will your credit card company authorize the transaction?
Typically, the latter is the more significant concern.
How Does Buying Crypto Using Your Credit Card Work?
For the most part, there aren’t significant differences between purchasing crypto or anything else with a credit card. Often, it’s as simple as reaching the payment portal of your seller and just clicking on the credit card option. However, a few points are worth considering if you’re seriously planning on purchasing crypto on credit.
Payment Network Restrictions
First, restrictions may be in place on the payment network you’re using. One good example is Mastercard, which treats crypto purchases as cash advances. As such, many crypto purchases may be counted towards your cash advance limit.
Some credit card providers go much further in their restrictions. One perhaps extreme example is Capital One. Capital One went so far as to block all purchases of cryptocurrencies using their credit cards. They state that they decided to protect their customers from market volatility and fraud.
Most credit card issuers (and others involved in the process) that make these decisions don’t make a big deal out of their choices. For example, Capital One didn’t issue any press releases about their decision. However, Coinbase revealed in 2018 that four banks started blocking Bitcoin purchases with credit cards. They tweeted that JPMorgan Chase, Citi, Bank of America, and Capital One had prohibited crypto purchases.
For their part, each of the banks that prohibited crypto purchases provided their own unique explanations for their decision.
Credit card providers, banks, and payment networks aren’t the only parties complicating your decision on whether to buy crypto with a credit card. For example, some exchanges charge an extra transaction fee for credit card transactions.
A few other, smaller considerations are worth keeping in the back of your head.
- Banks considering credit card purchases of crypto to be cash advances is now somewhat typical, and cash advance fees may apply.
- Regular foreign transaction fees apply if your merchant is in a country with another currency.
- Daily credit limits apply.
- Large purchases will affect your credit score.
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Things to Consider When Buying Crypto Using Your Credit Card
Let’s take a closer look at those extra factors that may apply when you buy crypto on credit.
Transaction fees for using debit or credit cards are standard in the crypto world. These fees are typically transparent and communicated to you ahead of payment confirmation. To avoid all fees, you usually must use an ACH payment (checking accounts routed directly to the merchant), which is, of course, a slower option. So, you’re faced with using the fast but expensive credit card versus the slow but cheap bank transfer.
You can’t avoid these fees by using another credit card. They’re charged by the exchanges. So, the only way to prevent them is to use a different payment method altogether.
Some alternatives to exchanges may enable you to buy crypto with a credit card without any special fees. For example, Robinhood allows this, but the problem is that you have no way to trade cryptos off-platform, and Robinhood has a minimal crypto selection.
We look into the best balance concerning transaction fees in our final assessment.
As we’ve already touched upon, many credit card companies and payment processors regard crypto purchases as cash advances. They do this under the logic that you’re using credit (borrowed fiat currency) to acquire digital currencies. In that way, they perhaps see it as similar to simply using credit cards to withdraw cash. But, of course, they’re also considering the risk of providing credit for cryptocurrencies, which they may view as highly speculative.
This is a tough barrier to get around. Checking different exchanges won’t help because your credit card company regards these transactions as cash advances. The only alternative is to apply for a credit card that doesn’t view buying crypto as equal to taking a cash advance. This step may be worth it for you if:
- You can access a credit card that won’t incur cash advance fees for buying crypto.
- You intend on using your credit card for multiple purchases.
Cash advance fees usually are very high. They thus provide a strong motivation to seek alternatives where they’re available.
Foreign Currency Transaction Fees
These fees are typically associated with crypto purchases, so they are definitely worth considering.
Any credit card transaction requiring a currency conversion will incur an extra cost. Margins on mid-market exchange rates typically range from 1% to 3% in the payment processing industry. Banks and credit card companies charge them as well.
The cryptocurrency revolution is a genuinely global phenomenon. If you get involved in crypto at all, you’ll inevitably deal with companies based in several countries. So, foreign exchange is a necessary part of the business.
The only way around these charges is to get a credit card with no foreign transaction fees. These credit cards typically have a small annual fee. Unfortunately, entry-level, no-fee credit cards rarely opt-out of charging foreign exchange fees. However, if you intend on making many foreign transactions, getting a no-foreign-transition-fee card can save you money.
Credit Card Limits
Lastly, you want to consider your credit card limits. If you plan on making credit cards your primary method for purchasing crypto, you may need a higher credit limit.
Many credit card providers are happy to increase your credit limit without charging you for it. If your credit history is good, this shouldn’t be a problem.
Where Can You Buy Bitcoin and Other Cryptocurrencies with Your Credit Card?
The Crypto Wallet App Nexo enables its users to buy Bitcoin and 20+ other cryptocurrencies with a credit card through the Nexo Crypto Exchange. The platform stands out for its low fees, fast-track opportunities for passive crypto income, like earning interest on your staked cryptocurrency, and crypto lending feature that allows you to borrow cash or stablecoins against your crypto at very competitive rates.
Click here to learn more about the Nexo Crypto Exchange and how you can buy crypto using your credit card after you sign up.