Bitcoin is a cryptocurrency that was developed and released by a group of anonymous programmers in 2008. Over the years a number of organizations have become bitcoin exchanges that have made the use of bitcoin more popular.
As the demand for bitcoin increases, the need to have means by which this can be purchased has also increased. One of the means by which bitcoin can be bought is through credit or debit cards.
Even as buying bitcoins with cards has become available it can still be quite confusing. Thankfully there are now a number of coin exchanges that have made it easier to buy bitcoin with card.
Many of the sites that act as bitcoin exchanges that used to accept payments only through bank accounts or PayPal now allow buying bitcoins through credit cards.
Things to consider when buying bitcoin using a credit card:
Please be reminded of some pointers when buying bitcoins using your card. Using your credit card for purchases impacts your credit score. It is important that you continue to have a positive credit rating so be careful with the amount that you are buying.
When you buy bitcoin, you’ll have to expect additional percentages will be added to your purchase as transaction fees. Coinbase, for example, has one of the lowest credit card transaction fees but he percentage is still quite substantial at 3.99%
In early 2018, Visa and Mastercard started considering cryptocurrency purchases as cash advances.
This not only meant higher fees, it also meant that interest would be charged immediately. This meant that you would have a credit card debt but will not have the advantages of earning rewards.
Before you buy bitcoins on credit, research your exchange and credit card to determine whether your purchase will be classified as a cash advance. If it will, you may want to consider paying through bank transfers.
Bitcoin and other cryptocurrencies change prices very quickly. If you buy bitcoin with money you don’t have — and the price drops dramatically — you could find yourself in a very difficult situation.
We’d advise against buying bitcoin using a credit card unless you can pay it off on the targeted due date. If you’re using a credit card to get rewards that’s good; if you’re using a credit card because don’t have the means to pay for bitcoin, then you should reconsider and wait until you can.
Advantages of using bitcoins with credit cards
As it is with most people and their purchases, the biggest advantage of buying bitcoins with a credit card is the ability to earn rewards. Just be sure your bitcoin purchase isn’t considered as a cash advance — if it is, then you will not have this advantage.
A riskier reason for buying bitcoin with a credit card is financial leverage. If buying bitcoin is treated as a purchase and not a cash advance, a credit card lets you use large credit lines and you can use this to your advantage to protect you from sudden plunge and surge of prices.
Whatever your motivation, always remember – it is never wise to spend more than you can afford. Doing so could land you in debt that erases all the advantages you can get from bitcoin transactions.