How To Make A Bitcoin Bank Transfer

Sponsored By

Make A Bitcoin Bank Transfer

Cryptocurrency has a high barrier to entry. Despite the interest in projects such as bitcoin, many people keep cryptocurrencies at arm’s length because of sheer technical complexity. For lay users, questions like “how do I buy a token” or “how do I convert it back to cash” are as intimidating as the fact that a single token could pay off their student loans.

Step by Step

The first step is figuring out how to buy a token, because that’s how you get in the game. We’ll look at this through a simple transaction: buying bitcoins.

Now, while it is possible to buy bitcoins with a credit or debit card, it’s not advisable. Exchanges prefer wire transfers from a bank account because it’s both more secure and less complicated. Card numbers get stolen all the time, and credit cards companies will sometimes challenge a purchase at a user’s request, so a bank transfer means everyone gets their money in a much more reliable fashion.

The upshot is that exchanges charge much less in fees for a bank transfer than any kind of card. (For example, the popular site Coinbase charges 1.49 percent of the transaction price for a wire transfer and 3.99 percent for a credit card.) So have your banking information ready, because you’ll likely want to use your checking account for this.

Next, select a coin exchange.

Buying a bitcoin is far more like online shopping than the industry’s mystique would make it seem, and choosing your vendor is the biggest step in the process. For users just looking to get started, Coinbase, CoinMama and Wirex are all highly regarded for their beginner friendliness.

Finally, choose your transaction method. Based on the website you selected, you’ll have two general ways to make this transaction: immediate (often preferred for peer-to-peer transactions) and wallet based.


An immediate purchase means exactly what it sounds like. Using the funds from your bank account, you will purchase the selected number of bitcoins. This is the system most used on peer-to-peer networks such as LocalBitcoins, which connect you with other individual sellers. Your website will either facilitate this peer-to-peer transaction or, in the event that it actually holds the tokens itself, it will sell you the tokens directly. In both cases, the website will then withdraw the funds directly from your bank account.

This has the advantage of simplicity and of not trusting third parties to hold your money. However, it has the problem of price.

Bank transactions sometimes need a long time to process, anywhere from hours to days depending on the network you use. The ACH system alone can take a day or more.
This means that your bitcoins could fluctuate substantially in price between when you commit to the purchase and when the transaction actually takes place. That doesn’t mean your purchase price will change. On any reputable exchange, purchase price is locked in at the time the parties commit to the transaction. It does mean, however, that the coin you receive could have a very different value than the one you bought.

Fiat Wallet

The alternative to a direct wire transfer is to load your funds into a fiat currency wallet on the exchange website. Doing this lets the exchange hold your money in its own accounts, and it removes that money from your bank account when you load your wallet. It is, basically, the cryptocurrency equivalent of a Starbucks card.

Any purchase that you make, whether peer-to-peer or from the exchange, then takes the funds from your wallet instead of your bank account. This has the advantage of immediacy. Although you have to trust potentially thousands of dollars in fiat currency to the exchange, since it holds the funds in its own network, the exchange can also process any bitcoin transaction immediately, without waiting for transaction time.

Many websites will also allow wallet users to buy and sell at what’s called the “spot price.” This is what people generally think of as the objective price of a commodity. For something like bitcoin, whose market value is determined almost entirely by supply and demand, prices can vary widely between buyers, sellers and even different marketplaces. Spot prices attempt to control for that, weighting these values together to create one realistic price.

When someone says a bitcoin is worth $9,885 (at the time of writing), they’re talking about spot price. Many exchanges reserve that only for buyers who use a fiat wallet. Want to know more about buying bitcoins? As a first step, get your credit report to make sure you have the overhead.

You may also like

All data provided by the Home Mortgage Disclosure Act, at updated Dec, 19
Read more