Much like a lot of credit card users, if you’re accustomed to using your credit card for your daily purchases, it may seem strange to learn that buying crypto on your credit card is a lot harder than it looks. Many people ask: can I buy crypto with my credit card? The answer isn’t as simple. Credit card companies have cracked down a lot in recent years with how much people can spend on crypto, if at all. You are limited to basically two options: using the exchange where you purchase your cryptocurrency (e.g. Binance) or directly through your credit card provider (e.g. Chase Bank).
It is also important to know that some cryptocurrency exchanges may not even accept credit cards. For example, Coinbase has taken a firm stance on not taking credit cards. Other exchanges, such as Bitfinex, CEX.io and Coinmama, say they accept credit cards, but have limited it to cards issued through Visa and Mastercard.
Buy Cryptocurrency With My Credit Card on Exchanges
Exchanges may say they accept credit cards, such as through Visa and Mastercard, but at the end of the day, it’s up to your credit card company to allow it (or not). Some credit card companies don’t allow their cardholders to purchase cryptocurrency, while others impose hefty fees on their cardholders.
At HJI Financial, we don’t recommend you use your credit card for cryptocurrency purchases. Here are reasons why we don’t recommend it:
You may have to pay extra fees from the exchanges
Exchanges may allow you to use your credit card for cryptocurrency purchases, but they can also impose additional fees for simply using a credit card. Yes, you read that correctly.
For example, the exchange may impose a certain percentage fee on every transaction you do with your credit card on top of what you’re purchasing. Say you purchase $100 worth of Bitcoin. Your exchange may impose a fee of 8% for simply using a credit card, bringing your total to $108. So for every $100 worth of Bitcoin you buy, you will have to pay an extra $8 for it. Now ask yourself: is it worth paying the extra fees to buy crypto with my credit card?
Credit card issuer(s) may consider cryptocurrency purchase as a cash advance
A credit card issuer may consider your cryptocurrency purchase as a cash advance. Cash advances are like taking out money at the ATM but through a credit card instead of a debit card. There are heavy fees linked to cash advances (sometimes as high as 25%!). That is very bad for you because you will pay a lot of high fees just for purchasing some cryptocurrency.
A cash advance doesn’t just come with only one downside, there are quite a few:
- Fees related to cash advances. There are one-time fees related to cash advances that are charged by credit card companies, usually between 3% to 5% of the total amount. If you take a cash advance of $100, you will pay between $3 to $5 for that cash advance.
- Much higher interest rates for cash advances. A lot of credit card companies charge much higher interest rates for cash advances as opposed to normal everyday purchases. For example, if your credit card APR is set to 14% normally, you may have conditions set to 25.99% APR for cash advances (yikes!).
- No interest grace period for cash advances. There are no grae periods for cash advances through credit card issuers. Through normal purchases, if you pay your monthly balance in fully, you won’t be charged interest. However, interest rates on cash advances start to occrue on the first day you take it out.
- No rewards linked to cash advances. If your credit card company considers cryptocurrency purchases equivalent to cash, then you won’t get any rewards for it. No cash back, miles, points, nothing.
It all depends on what credit card company you use and if they even allow cryptocurrency purchases on their card(s). Before trying to make a purchase, we recommend you speak to your authorized credit card company representative. The other option is you don’t use a credit card to make purchases, simple as that. Use the cash you have in your bank account or other accounts for cryptocurrency purchases. Remember, profits and returns are not guaranteed, so decide wisely. Now, ask yourself this: should I buy crypto with my credit card?
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