Best Cryptocurrency Exchange Fees

Can I Buy Cryptocurrency With A Credit Card? – Forbes Advisor

Can I Buy Cryptocurrency With A Credit Card?
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Like gold in the 1850s and .com stocks in the 1990s, it seems everyone is trying to get their hands on cryptocurrencies. Purchasing cryptocurrency with a credit card is possible but can be a dangerous undertaking. Cardholders can expect fees from both sides of a transaction involving cryptocurrency and credit cards, as well as face the possibility of losing money quickly due to fluctuating currency values ​​and high interest rates.

Best Cryptocurrency Exchanges of 2022

We combed through the offerings of the leading exchanges, and large amounts of data, to identify the best cryptocurrency exchanges.

When buying cryptocurrency with a credit card is allowed

It is best to check with the credit card issuer to see if they allow cardholders to purchase any type of cryptocurrency. American Express currently allows such transactions with a few strict conditions. Bank of America recently changed its tune in 2020 when a Reddit user shared an image of a message they received stating that said cryptocurrency purchases would be treated as cash advances. (Note: Bank of America’s terms on this remain unclear.)

In addition to double checking with the credit card company, crypto holders should also look for a cryptocurrency exchange willing to accept credit cards for deposits or purchases. Some only allow direct deposits from banks, cash deposits, or debit card purchases. Coinmama, CEX.io, and Paxful are all exchanges that currently accept credit cards.

There are also restrictions on the types of credit cards that exchanges accept. Some exchanges may only take Visa or Mastercard credit cards. Paxful, for example, has a variety of Bitcoin sellers from around the world selling on the exchange site. It is one of the few exchanges that currently accepts American Express credit cards, but acceptance at the exchange also depends heavily on the specific seller.

When purchasing cryptocurrency with a credit card is not allowed

Major US credit card companies may not allow cardholders to purchase cryptocurrency with a credit card. For example, Citibank banned cardholders from using credit cards to purchase Bitcoin and other cryptocurrencies in 2018 for fear of their volatility and the potential for fraud. Some credit card companies may charge a cash advance fee if the cardholder attempts to make a cryptocurrency purchase.

Note that some major US credit card companies do not make it easy to find information on their websites regarding whether or not they allow cardholders to purchase cryptocurrency. It is best to call the number on the back of the card and speak to a representative. Ask clearly, directly and specifically whether or not the purchase of cryptocurrency is allowed and, if so, what types of fees will be incurred.

Some cryptocurrency exchanges do not accept credit cards as a method of payment, such as eToro and Coinbase.

Types of fees cardholders can expect

Cardholders can expect to pay a fee for both the exchange at which the currency was purchased and the credit card issuer. Before making any purchases with an approved credit card, research the exact cost of each purchase and the financial benefits that will be (or will not be) before fees are incurred.

Cryptocurrency exchange fee

The exchange may charge commission fees and/or service fees for using a credit card to purchase or deposit crypto. For example, CEX.io is an exchange that offers quite a few cryptocurrencies for purchase, including Bitcoin. Users are allowed to purchase cryptocurrency with a Visa or Mastercard credit card, but US cardholders are subject to a 2.99% commission fee with a minimum purchase of $20.

Depending on the exchange, sellers within the exchange may also design fees to buyers depending on some factors, such as where the seller is located, the amount of the purchase, and the type of credit card used.

Credit card company fees

Some credit card companies that allow cardholders to make purchases in cryptocurrency treat the purchases as a cash advance (cash advances usually refer to the cardholder’s use of a credit card to withdraw money from an ATM). This has several drawbacks.

Let’s use common card terms as an example of the types of fees a cardholder can incur:

  • Cash Advance Fee: Some cards treat the purchase of cryptocurrency as a cash advance. This means that every cryptocurrency purchase is subject to a cash advance fee. A typical fee will be either $10 or 5% (whichever is greater). These fees are in addition to fees charged by the seller or exchange.
  • Cash Advance Interest Rates: Most cards have a higher annual percentage rate (APR) for cash advances – over 25%. This is a changing interest that changes as the market changes. Interest will begin to accrue on the day the purchase is made and will continue to accrue until the balance is paid. By comparison, cardholders have up to 25 days to pay the normal credit card fee before any interest is charged.
  • No credit for bonuses or rewards: The credit used to purchase cryptocurrencies (and thus provide a cash advance) does not usually qualify for any purchase bonuses nor for the spending that would normally apply to the registration bonus.
  • Low credit limits: Cash advances often have a credit line lower than the cardholder’s total credit limit that applies to the card itself. Cardholders hoping to make large purchases of cryptocurrency may find themselves restricted by the terms and restrictions of a cash advance.

Other credit card risks may include:

  • Foreign Transaction Fee: Foreign transaction fees may be applied to each cryptocurrency purchase if the seller is from a different country and the credit card used charges a foreign transaction fee.
  • High risk of fraud: There is a high potential for fraud if the seller is not properly checked and the cardholder provides valuable information such as name and credit card number.
  • High investment risk: Investing in cryptocurrencies with credit can lead to serious debts. Cardholders can quickly accumulate fees and interest that they may not be able to pay later, can increase their credit utilization rate dramatically or may lose the value of their investment due to the volatile crypto market.

Other ways to buy cryptocurrency with credit cards

With the development of the cryptocurrency market, the standard financial market is also developing. There are a few entry-level credit card issuers that offer bitcoin or other cryptocurrencies as rewards or rewards. For example, BlockFi, a younger card company, offers 1.5% Bitcoin rewards for every purchase made. They also boast Bitcoin welcome bonuses and more bonuses from trading and customer referrals.

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Using a credit card to purchase cryptocurrency will not make sense for most people. Cardholders should consider the major drawbacks before deciding to purchase cryptocurrency using a method that includes a credit card. Buying cryptocurrencies is often best accomplished with direct deposits, debit cards, or wire transfers.

Credit card purchases often come with high fees that reduce the value of a good investment or reduce returns by a large margin. Cardholders also face a high risk of getting into large debts that are difficult to get out of. For those who insist on using a credit card, we recommend contacting a credit card representative to discuss the ramifications with a particular credit card issuer and research a cryptocurrency exchange with the best credit card rates.

Best Cryptocurrency Exchanges of 2022

We combed through the offerings of the leading exchanges, and large amounts of data, to identify the best cryptocurrency exchanges.

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