Bitcoin is the world’s largest cryptocurrency by market capitalization and trades on several exchanges across the globe. Because it has generated a lot of hype, many investors may be wondering how to tap into the Bitcoin market. You can buy coins in many ways, including with a credit card.
Make sure you have your credit card number, card verification value, and expiry date if you want to buy Bitcoin with your credit card. You'll have to enter these details on the checkout page of an exchange to get your desired Bitcoin value. Buying Bitcoin with a credit card is not only easy, but it also comes with certain benefits. However, there are things investors must consider before purchasing Bitcoin withcredit cards to ensure they are doing it correctly.
Key Takeaways
- Cryptocurrency investors may purchase Bitcoin with a credit card.
- Consider the type of credit card and the exchange you use before you link your card.
- Be aware of any transaction fees and other considerations before using your credit card to purchase Bitcoin.
How to Buy Bitcoin With a Credit Card
Buying Bitcoin with a credit card can be relatively simple. But there are several factors you must consider. We've laid out some of the key steps you should follow if you intend to buy Bitcoin with a credit card.
Step 1: Research the Credit Card
Should you plan to purchase Bitcoin with a credit card, the first thing to do is research the card and payment company. That's because not every credit card supports the purchase of Bitcoin.
Credit cards that support Bitcoin purchase include:
- American Express
- Mastercard
- Visa
Each of these cards demands unique fees. Researching these cards gives insight into the fees each payment company charges.
Step 2: Research the Exchange
Some exchanges support the purchase of Bitcoin using credit cards. But, others may not allow this type of purchase. Even when you go through an exchange that allows credit card purchases, it may take time to process and validate to transaction. Exchanges that don’t accept credit card purchases simply use peer-to-peer (P2P) means for the transfer of Bitcoin.
Some popular exchanges that use credit cards in the purchase of Bitcoin include Binance and Kucoin.
Step 3: Link the Credit Card
Once you’ve found an exchange that meets your requirements, verify your account by providing your personal information to meet know-your-customer (KYC) requirements. The next step is to link your credit card to the exchange. To do this, enter your full name, card details, and billing address.
When you select Bitcoin, enter the amount you desire and choose the option of paying with a credit card. You will then be redirected to your bank’s one-time password transaction page. Follow the instructions and get your Bitcoin deposited into your wallet, provided the transaction is successful.
Cryptocurrency investors can now buy and sell Bitcoin exchange-traded funds (ETFs). The Securities and Exchange Commission (SEC) approved 11 ETFs in January 2024 for trading on several exchanges, including the NYSE Arca and the Nasdaq. Among the funds are the Grayscale Bitcoin Trust (GBTC), the Bitwise Bitcoin ETF (BITB), and the Hashdex Bitcoin ETF (DEFI).
What You Need to Open an Exchange Account
There are several requirements needed to open an exchange account. For decentralized exchanges, the process is pretty simple: Download the software or browser extension, set up an account, and store your recovery phase.
For centralized exchanges, you are expected to meet the KYC verification requirement before being able to fund your account and trade. Things needed to open an exchange account are explained below.
Personal Information
Exchanges often require customers to provide their personal information to meet KYC requirements as mandated by regulatory authorities. Personal information required includes:
- Full name
- Copy of identification, such as a passport
- Proof of address, such as utility bills
- Social Security number (SSN)
Some exchanges may require additional information.
Minimum Deposits
Every exchange has a range of deposits with which users must fund their accounts. For example, Binance and Coinbase require users to deposit a minimum of $10 and $50, respectively, to complete their trades.
Best Bitcoin Exchanges
| Company | Transaction Fees | Currencies | Minimum Deposit or Purchase | Trade Limits |
|---|---|---|---|---|
| Kraken | 0.00% to 0.26% | 200+ | $1 | Yes |
| Coinbase | 0.00% to 0.60% | 200+ | N/A | Yes |
| Crypto.com | 0.00% to 0.075% | 350+ | 1 euro | Yes |
Factors to Consider When Purchasing Bitcoin With a Credit Card
Exchange Fees
When swapping dollars for Bitcoin or any other cryptocurrency, it’s important to understand that an exchange may charge a fraction of the transaction cost. In most cases, an additional fee is charged when investors decide to fund their accounts using credit cards. The exchange may also charge extra fees for its services.
A typical example is Coinmama. Every purchase incurs a fee and making payment with a credit card requires an additional fee of 3.24% to 3.34%. This means purchasing $1,000 worth of Bitcoin using credit cards will attract an extra fee of $33.40, excluding platform fees. You, therefore, will need a good return on investment to make up for the fees.
Debt
Bitcoin is volatile and this makes investing quite risky. It’s more risky if you’re using a credit card to go into debt to buy cryptocurrency. This translates into paying exorbitant interest on volatile investments.
Scams
Choosing a currency exchange without any security reputation can be risky. You might have your personal information, including your credit card number, stolen.
Cash Advance Penalties
Just like using your credit card to withdraw funds from an automated teller machine (ATM), your credit card issuer is likely to view the crypto purchase as a cash advance. This isn’t favorable as it has the following downsides:
- Higher Interest Rate: As with most payment processors, a higher annual percentage rate is charged for cash advances compared to regular purchases.
- Foreign Exchange Fee: Should an investor use an exchange based outside the U.S., a foreign exchange fee may be incurred if the credit card charges one. This is usually a 3% fee.
- Cash Advance Fee: Typically 3% to 5% of the amount withdrawn, this is a one-time fee charged when you take your advance. An advance of $100 will likely attract $3 or $5 in fees which will be deducted from your account balance.
- No Grace Period: Credit card companies usually allow for a 21-day grace period to pay off your purchase before interest is charged. This only works provided you pay your balance in full monthly. This, however, doesn’t rule out the fact that cash advances start to accrue interest from day one.
- Lower Credit Limit: While there’s a general credit limit, some credit cards have a separate cash advance credit limit, which is lower than the general one.
- Credit Utilization: Using your credit to make small purchases such as groceries doesn’t have much impact. However, big crypto purchases use up your available credit which gravely impacts your credit scores.
- No Credit Card Rewards: Using your credit card and maintaining a good credit score comes with significant rewards such as cash back, travel points, or miles. However, should the card issuer consider a crypto purchase a cash equivalent, your spending probably won’t qualify for rewards. Overall, this depends on the issuer. As part of your credit card research, you could call the company to ask whether a cryptocurrency purchase is considered a cash advance.
How to Buy Bitcoin Anonymously With a Credit Card?
If you want to buy Bitcoin with a credit card without ID verification, you’ll still need a wallet where you can safely store the coins. Wallets such as Exodus, Mycelium, and Ledger Nano X are great choices since they support Bitcoin.
To buy Bitcoin, you may consider using P2P marketplaces such as Paxful which allow you to trade directly with individuals while eliminating the middleman. Some software wallets such as Lobster allow you to trade seamlessly and anonymously. Exchanges are also great options, but just a handful give room for optional identity verification, hence you may want to choose these.
Overall, the methods itemized above let you buy Bitcoin seamlessly with your credit card.
What Happens If You Buy Bitcoin With a Credit Card?
Buying Bitcoin with a credit card means you’ll have to select a card and exchange that supports Bitcoin purchases and credit cards respectively. Even though the process is seamless, transactions aren’t instant.
The exchange will need to verify to validate that the transaction is real and no fraudulent traces are found.
How Long Does It Take to Buy Bitcoin With a Credit Card?
Since buying Bitcoin with a credit card is convenient, one will expect it to be instant. However, this doesn’t seem to be the case because the exchange must verify the transaction and ensure no scam is involved.
Why Won’t My Credit Card Work for Bitcoin?
There are several credit card processing companies in existence. If you plan to buy Bitcoin with one and notice it doesn’t work, it could be one of two things: The credit card doesn’t support Bitcoin purchase, or the exchange doesn’t support credit cards.
As an investor, research should be paramount. Before using a credit card, you should research to know whether it supports Bitcoin purchases. Also, choose an exchange that supports credit card payment.
The Bottom Line
Bitcoin was launched in 2009 and remains one of the world's most popular cryptocurrencies. If you want to purchase it, you must open an account and fund your wallet. If you intend to buy Bitcoin using a credit card, be sure that your exchange supports credit card transactions. You'll also want to consider whether making a purchase with your credit card makes sense, which means researching fees and other factors that can eat away at your bottom line.
