Cryptocurrencies have become more popular lately. More and more investors have become interested in digital assets, whether they are buying Bitcoin or an alt-coin such as Dogecoin or Ethereum.
While initially, buying cryptocurrencies was tricky, needing the use of hardware wallets and complex transactions, now it’s possible to easily buy the product via a credit card. The convenience of doing so appeals to many novices in the crypto space.
For those who would like to use a credit card to buy cryptocurrency, the process is as follows:
- Open an account with a cryptocurrency exchange that accepts credit cards.
- Make sure that your credit card company allows you to use their card to purchase cryptocurrency.
- Go through the process to verify your account. You will typically need to upload a valid ID such as a passport or driver’s license to do this.
- Once your identity has been verified, you can deposit money into the account. Some exchanges only accept the money deposited from a bank account, but some do accept credit card deposits. This is why, if you want to use a credit card to buy cryptocurrency, you need to make sure to choose an exchange that will allow you to do so.
- Go ahead and make your purchases using your credit card.
While the process itself seems pretty simple once you have set up a membership with an exchange, in reality, there are disadvantages to buying crypto with a credit card. As discussed by the experts at SoFi Invest, one disadvantage of using a credit card to buy cryptocurrencies is the high fees. Most credit card companies treat a crypto purchase as a cash advance, which typically has high fees associated with them. They also tend to charge high-interest rates. Because of this, unless the consumer pays off their purchase by the next billing cycle, the charges accrued could outpace any increase in the price of the cryptocurrency, thus negating any benefits from the purchase.
Additionally, users often get no grace period for these types of purchases, and the money spent may not count towards any rewards programs the user has. There may also be lower credit limits for these types of purchases.
Of course, as the cryptocurrency market evolves, the financial markets may adapt to make it easier for users who wish to use credit cards to purchase products such as Bitcoin. A few start-ups, for example, are now offering fractional amounts of cryptocurrencies as part of a rewards program, while another option might be to pay for purchases with cryptocurrency.
Given all the disadvantages to using a credit card to buy cryptocurrency, it is wiser to stick with more traditional payment methods, such as using a bank account or a money transfer into an investment account. Some active traders may still appreciate the convenience of having a credit card option, but they must ensure they are careful in using it.
Fortunately, SoFi has investment options that allow the user to invest as little as $10 on their secure platform. Not only are purchases protected, but a mobile app makes transactions painless.