Cryptocurrency is making waves again, with Bitcoin hitting record highs and the entire market approaching a $3 trillion market capitalization. As more people rush into the crypto space, you might wonder if you can purchase cryptocurrency using a credit card. After all, you use your credit card for other transactions—so why not crypto?
While it’s possible to buy crypto with a credit card, it’s not as simple as swiping for groceries. Only a few major exchanges accept credit cards, and most charge steep fees for the convenience. Additionally, credit card companies may treat these purchases as cash advances, which come with high interest rates and fees. Considering the volatility of cryptocurrency, buying crypto with a credit card can be a risky financial decision.
Can You Buy Cryptocurrency with a Credit Card?
Yes, you can purchase cryptocurrency with a credit card, but only a limited number of credit card issuers and crypto exchanges allow it. Even when permitted, additional fees and charges can significantly increase your costs. It’s essential to know the potential pitfalls before proceeding.
Crypto Exchanges That Accept Credit Cards
As of August 2024, some of the top cryptocurrency exchanges that allow you to buy crypto with a Visa or Mastercard credit card include:
- Binance
- BuyUcoin
- KuCoin
However, not all exchanges support credit card purchases, with some preferring direct bank transfers or debit card payments. Smaller exchanges may also partner with third-party apps, called “fiat gateways,” to process credit card transactions. Be sure to verify the terms before attempting to purchase cryptocurrency with your credit card.
Credit Card Issuers That Allow Crypto Purchases
Once you’ve found a crypto exchange that accepts credit cards, the next step is to check with your card issuer. Some credit card companies do not allow crypto purchases due to the perceived risk. Even if they do, crypto transactions are usually categorized as cash advances, which come with high fees and interest rates.
Before making a purchase, it’s advisable to review your card’s terms, as there may be restrictions on the amount you can spend and limitations on daily or total cash advances.
Can You Buy Crypto Without Identity Verification?
Whether or not you can buy cryptocurrency with a credit card without identity verification depends on the platform. Most exchanges require some form of verification, such as providing a government-issued ID like a passport or driver’s license, to prevent fraud and comply with regulatory standards.
How to Buy Crypto with a Credit Card: A Step-by-Step Process
Buying cryptocurrency with a credit card varies slightly by platform, but the general process remains the same:
- Sign Up for an Account: Start by registering on a crypto exchange that supports credit card payments. Be prepared to verify your identity, often by submitting a photo ID.
- Add Your Credit Card Information: Once your account is set up, link your credit card as a payment method. You can typically do this in the exchange’s “Buy Crypto” section.
- Deposit Funds: Some exchanges may require you to deposit funds before purchasing crypto. This transaction will likely be treated as a cash advance by your card issuer.
- Purchase Cryptocurrency: After linking your card and adding funds, you can choose the cryptocurrency you want to buy. Note that some exchanges may place a 72-hour hold on funds for credit card transactions, which could affect your purchase timing.
Fees to Consider When Buying Crypto with a Credit Card
Using a credit card to purchase cryptocurrency can be expensive due to the multiple fees involved. Here’s a breakdown of the costs:
Crypto Exchange Fees
- Transaction Fees: A flat fee ranging from 0.10% to 3% of the transaction value, depending on the exchange.
- Debit and Credit Card Fees: Additional fees for using a debit or credit card, typically between 3% to 5% of the purchase amount.
- Spread Fees: A markup on the cryptocurrency’s price, added on top of other transaction fees.
Credit Card Company Fees
- Cash Advance Fees: Cryptocurrency purchases are often treated as cash advances. These transactions incur a fee, typically the greater of $10 or 5% of the transaction amount.
- Cash Advance Interest: Cash advances usually come with a high Annual Percentage Rate (APR), often exceeding 25%. Interest starts accruing immediately, with no grace period.
- Foreign Transaction Fees: If the crypto exchange is located outside your country, you may also face foreign transaction fees, usually 1% to 3% of the total amount.
Other Risks of Buying Crypto with a Credit Card
Aside from the high fees, purchasing cryptocurrency with a credit card carries additional risks:
- No Rewards: Crypto purchases are usually coded as cash advances, meaning they don’t qualify for rewards or count toward sign-up bonuses.
- Lower Credit Limits: Cash advances often have lower limits than standard credit card transactions, which may prevent you from making large crypto purchases.
- Fraud Risk: Providing sensitive credit card information to a crypto exchange may increase your exposure to fraud.
- High Investment Risk: Using borrowed money to invest in a volatile asset like cryptocurrency can lead to significant losses. With high interest rates, it’s easy to fall into debt if the value of your crypto holdings decreases.
- Mandatory Fund Holds: Some exchanges place holds on credit card transactions, delaying your purchase and potentially affecting your ability to capitalize on favorable market conditions.
Crypto Rewards Credit Cards
While using a credit card to directly purchase crypto isn’t advisable, some cards offer rewards in the form of cryptocurrency. These cards let you earn cashback or other rewards that can be converted into popular cryptocurrencies. However, it’s crucial to assess your risk tolerance before applying for a crypto rewards card, as the value of crypto rewards can fluctuate wildly.
Pros and Cons of Buying Crypto with a Credit Card
Pros:
- Offers more purchase protections compared to bank transfers.
- Convenient for those who prefer credit card payments.
Cons:
- High fees from both exchanges and credit card issuers.
- Purchases are treated as cash advances, resulting in higher costs.
- Transactions may take longer due to fund holds.
- Borrowing money to buy crypto carries significant financial risk.
Final Thoughts
Buying cryptocurrency with a credit card is an expensive option, laden with fees and high-interest charges. Though a handful of crypto exchanges allow credit card payments, the costs can severely diminish your investment returns. If you’re determined to use a credit card, research both your card issuer’s policies and the crypto exchange’s fees to avoid unpleasant surprises. Ideally, consider other payment methods, such as direct bank transfers, to minimize fees and interest charges.
