Buying Bitcoin with Credit Card
Cryptocurrencies are digital currencies that have been prevalent in the past decade. With examples like Bitcoin, Litecoin, Ethereum, and Cardano, cryptographers, have introduced several other examples. With increased crypto usage, you can now buy bitcoin with credit card and purchase items in the same currency. You can also buy gift cards with cryptocurrencies along with a wide range of items and services. Purchasing cryptos with credit can, however, be detrimental to your credit score. Read on to find out how buying BTC can affect your credit history.
Check with your credit issuer and the exchange website
If you are used to making purchases with your credit card, reconsider your decision once you want to buy cryptocurrencies on credit. There are various impediments to making the purchase, regulations from the credit issuer and the exchange in buying the crypto. You should check first with your credit issuer to inquire about purchasing crypto, like BTC on credit. Coinbase, a renowned crypto exchange, refuses credit purchases. However, Coinmama and CEX are lenient because they accept credit cards, but only Visa and MasterCard disclaimer. But with Paxful exchange, you can buy crypto on credit following their many vendors globally that accept American Express cards. The chosen vendor will determine your request’s acceptance regarding the credit purchase of BTC.
Charges from the exchange and credit issuer
You might be charged for the transaction fees in changing dollars to BTC or other cryptos for an exchange. Further, you may incur extra costs regarding the purchase since it’s in credit. An example is the Coinmama exchange platform, which charges 5.9% on the transaction and 5% on credit purchases. Their minimum purchase is $60 purchase worth of crypto. If you decide to buy $1000 of crypto, you will have to pay $109 in fees and remain with $891. If you had planned for it as an investment in crypto, you must make a minimum of 12% profit to recover your money. If crypto faces a decline in value, you may be at risk of missing your periodic payments, which will ruin your creditworthiness.
For credit card issuers, because you will have to pay cash advance fees because of the nature of your purchase, 3% to 5% of the amount credited will be charged. If you get a cash advance of $1000, you will pay fees worth $30 to $50.
Cash advance and its downsides
If your credit card issuer accepts crypto purchases on credit, they will have to treat your transaction as a cash advance. Therefore all the regulations on cash advance payments will be taken into account. As the purchaser, you will face the following penalties:
- The cash advance fee, as said earlier amounting to at least 5% of the amount credited.
- Harsh interest rates. Ordinary purchases have lower interest rates, but cash advances face heavy annual charges
- No grace period. Cash advances begin accruing interest from the first day, unlike when you use up all your credit card money and are given a 20-day grace period until you start paying interest.
- You don’t get rewarded credit card usage. Purchasing cryptos is viewed as a cash advance. Therefore, you don’t get to qualify to get the rewards like cash back or travel points.
Remember that all these harsh conditions might catch up with you, and if you fail to honour your payments, you will ruin your credit score.
If you want to buy bitcoin with credit card, consider the implications first and the impact it may have on your credit score. Buy cryptocurrencies and enjoy seeing them appreciate. Later on, you can spend your money by buying gift cards, but keep in mind the mode in which you buy the volatile digital currencies.