Can You Buy Cryptocurrency With a Credit Card?

It is possible to buy bitcoin and other cryptocurrencies with a credit card. Depending on the exchange used and the rules upheld by your credit card issuer, several factors can come into play. One key distinction investors should know when buying crypto with a credit card is that most financial institutions treat these transactions as cash advances rather than regular credit purchases.

Users who want to buy crypto with a credit card should be warned that doing so will likely be more expensive, complicated, and risky than using other payment methods. That said, here’s all you need to know about buying crypto with a credit card.

Where Can I Buy Cryptocurrency With a Credit Card?

Depending on how a crypto exchange works, they may or may not allow the use of credit cards.

Some exchanges, like Coinbase , do not let users buy bitcoin with a credit card—or any other crypto, for that matter. A bank account or debit card might be the only way to fund crypto purchases on exchanges like these.

Other exchanges, such as Binance , do allow for this feature, though they typically charge fees for credit card transactions, on top of any commission or other standard fees. Here is a list of some popular cryptocurrency exchanges that currently accept credit cards for funding accounts, along with their credit card fees.

•   Coinmama: They charge an additional 5% fee.
•   Bittrex: Credit card transaction fees are 3%.
• Use Visa or MasterCard on a deposit and you’ll be charged a 2.99% fee.
•   Changelly: Their fee for using a credit card is 4%.

It’s important to note that exchanges sometimes change their rules around payment methods and other details, due to the constantly-evolving regulatory landscape. There was a time when Coinbase accepted credit cards, for example, but as of the time of this writing, they do not.

Drawbacks to Buying Crypto With a Credit Card

In 2018, it was revealed that financial institutions that issue credit cards had begun to treat cryptocurrency purchases as cash advances. This gets accomplished through the use of a specific merchant category code (MCC) to classify the transaction. In this case, applying a cash advance MCC to crypto purchases served as indirect cryptocurrency regulations.

Some speculate that this was a move on the part of card issuers to protect themselves from potential defaults, which may have been a heightened risk during the bear market for crypto investing of 2018-2019. By discouraging people from buying crypto with a credit card, financial institutions may have hoped to reduce the risk of people loading up on huge crypto purchases and not being able to pay the bill if the price of their crypto holdings tanked.

On the exchange side of things, some exchanges don’t let users buy cryptocurrency with a credit card, hoping to shield both themselves and their customers from the potential pitfalls involved. One thing is certain: When you buy crypto with a credit card, it’s not the same as buying crypto directly into a crypto wallet using cash.

These are some of the bigger reasons why buying crypto with a credit card might be more trouble than it’s worth.

High Fees

When a cardholder goes to buy crypto with a credit card, most credit card issuers treat the transaction as a cash advance, as if they used their credit card to obtain cash from an ATM.

A cash advance fee is typically a one-time fee of about 3% to 5%. A purchase of $100 worth of crypto would cost at least an additional $3, in that case. Bear in mind, this is on top of any credit card transaction fees the crypto exchange might charge.

High Interest Rates

Cash advances also tend to come with higher interest rates than those that apply to regular purchases. If a consumer doesn’t pay off their crypto credit card purchase on time, the interest charges on that credit card could add up quickly.

No Grace Period And No Rewards

In some cases users who pay their credit card balance in full every month get the benefit of a grace period of 20 days or more to pay off purchases before being charged interest. But with cash advances, that grace period may not exist.

Cash advances can begin accruing interest from day one—and with a potentially higher interest rate than ordinary purchases, the extra fees can climb fast.

On top of all that, if the card issuer classifies crypto purchases as cash equivalents, the money spent might not count as points toward rewards programs like cash back or frequent flier miles.

Lower Credit Limits

Some credit cards come with a lower cash advance limit than the regular credit limit. This can limit the buying power of a user who wants to buy crypto with a credit card.

The Takeaway

Now that you know how to buy crypto with a credit card, you may decide to stick to other payment methods. Between the fees imposed by crypto exchanges and those leveled by credit card companies, it may seem hard to justify using a credit card to buy cryptocurrency.

Using lines of credit to fund crypto purchases may lead people to invest with money they don’t have. It should be crypto basics to avoid this kind of leveraged speculation.

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Find out how to start investing in crypto with SoFi Invest.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
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