Can you use a credit card to buy crypto uk

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While it’s possible to buy cryptocurrencies with a credit card, many credit card issuers don’t let you use their credit cards to do so. And even if you’re able to, it’s often not a good idea. The issuer may charge you a fee—or several—and you likely won’t earn rewards on the transaction. Plus, exchanges where you buy cryptos might charge you more for using a credit card than transferring funds from a bank account.

If you’re considering using a card because you don’t have the money available, you also may want to reconsider. Credit cards tend to have high interest rates, and the volatility of cryptocurrencies means the coins you buy may quickly drop in value.

How Does Buying Cryptocurrency With a Credit Card Work?

Cryptocurrencies, including Bitcoin, Ethereum and Dogecoin, are typically bought and sold using online exchanges. Each exchange sets its own rules for the cryptocurrencies it offers, the types of payment it accepts and the fees it charges.

Some exchanges, such as Binance.US, Coinbase and Gemini, don’t allow credit card purchases. Others may accept cards, but only from people living in certain countries or states. Those that do let you buy cryptocurrencies with a credit card, such as Coinmama, may only accept Mastercard and Visa cards. (Again, whether you can actually make the purchase also depends on your credit card issuer’s policies.)

Before you can buy cryptocurrencies, you generally need to create an account on the exchange’s website or mobile app. You may also need to verify your identity, which could require you to upload a picture of a government-issued photo ID. Once your account is verified, you may be able to purchase cryptocurrencies with a credit card or other funding source.

Drawbacks of Buying Cryptocurrency With a Credit Card

There are many potential drawbacks to using a credit card to buy a cryptocurrency, and few—if any—benefits. The specifics can vary depending on your card’s terms and the exchange, but consider:

  • The transaction may be considered a cash advance. If your credit card issuer treats the transaction as a cash advance, you may have to pay a cash advance fee on each transaction and it may immediately accrue daily interest—often at a higher interest rate than purchases. Your card may also have a lower cash advance limit than credit limit.
  • Promotional interest rates won’t necessarily apply. Even if your card offers a 0% APR promotional rate on purchases, this generally won’t apply to cash advances.
  • You may pay foreign exchange fees. If the exchange or payment processor isn’t based in the U.S., you may also have to pay a foreign transaction fee for each purchase.
  • You might not earn rewards. Rewards credit cards also often won’t give you rewards for cash-like purchases, including cash advances. The purchases also might not count toward intro bonus requirements.

Additionally, exchanges may charge different fees depending on how you add funds to your account or make a purchase. Often, a bank transfer can be less expensive than using a debit or credit card.

You’ll also want to research an exchange before submitting any of your information. Some sites may be scams set up to gather your personal and payment information. While buying cryptocurrencies can be safe, even some well-known exchanges have abruptly shut down without returning customers’ funds—what’s known as an exit scam.

Can You Earn Crypto Rewards With a Credit Card?

Similar to how you can use a rewards credit card to earn cash back, miles or points, some companies are creating credit cards, debit cards and prepaid cards you can use to earn cryptocurrency rewards.

However, many of these crypto cards are still being developed. For example, you can sign up for the waitlist for the BlockFi Bitcoin Rewards Credit Card, Coinbase Card and Gemini Credit CardTM. But you can’t apply for the cards yet.

There are a few options currently available. The Crypto.com exchange has a prepaid card that you can use to earn rewards. However, you need to buy and hold on to its own cryptocurrency, Crypto.org Coins, for at least 180 days before you can qualify. The SoFi Credit Card is a more traditional cash back credit card that’s open to new cardholders. You can earn 2% cash back on all eligible purchases and choose to redeem your rewards as crypto in a SoFi active invest account.

Compare Cash Back Cards

Another option if you want to use credit card rewards to buy cryptos is to get a cash back rewards card and transfer your rewards to your bank account. Then, use those funds to buy cryptocurrencies through an exchange. While it’s not as direct, many exchanges charge no or low fees for bank transfers, and you won’t have to worry about credit card cash advance fees.

You can quickly compare cash back card offers from our partners in the Experian CreditMatchTM marketplace. If you sign in, you can choose cards to create a side-by-side comparison and get matched with specific cards or offers based on your credit profile.

All information about the BlockFi Bitcoin Rewards Credit Card, Coinbase Card, Gemini Credit CardTM, Crypto.com prepaid card, and SoFi Credit Card has been collected by Experian and has not been reviewed or provided by the issuer of the card. Offer details may be outdated.

You can buy crypto with a credit card — but don't miss the true cost

You can buy crypto with a credit card — but don’t miss the true cost

These days it really does seem like everyone has some bitcoin or another cryptocurrency jingling around in their digital pockets.

Even though the true figure is more like one in 10 Americans, that’s still a big number — and the fear of missing out on the next major price surge is real.

If you don’t have the funds to make a sizable investment, it’s tempting to reach for your credit card. After all, you can just pay it off with your crypto earnings, right?

Well, maybe — but as it turns out, buying crypto with a credit card can be extremely expensive. Until you understand the true cost, keep your Visa or Mastercard in its holster.

Can you buy crypto with a credit card?

Hands holding credit card and using laptop. Online shopping

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Though some investment brokers like Robinhood allow you to purchase cryptocurrencies directly through their platform, many people buy crypto via specialized exchanges.

Keep in mind, while it is possible to buy cryptocurrencies with credit cards, not all crypto exchanges accept them.

This includes Coinbase, the biggest exchange in the United States. On Coinbase, the only payment methods accepted in the U.S. are bank ACH (automated clearing house) transfers, debit cards, wire transfers and PayPal.

That said, plenty of exchanges do accept credit cards, including Coinmama, CEX.IO and eToro.

But just because you can buy crypto with a credit card doesn’t mean you should. Here’s why.

How does buying crypto with a credit card work?

Physical version of Bitcoin (new virtual money) and banknotes of one dollar. Exchange bitcoin for a dollar. Conceptual image for worldwide cryptocurrency and digital payment system.

Lukasz Stefanski / Shutterstock

When buying cryptocurrencies on an exchange, you have to choose a payment method to deposit cash into the exchange. From there, you trade that cash for crypto.

Funding your account using ACH (that is, connecting your bank account) is generally the cheapest route — sometimes it is even free. The same cannot be said for credit cards.

While they may be convenient, that convenience comes at a steep price.

Crypto exchange transaction fees

Cryptocurrency exchanges make money in different ways. Almost all of them take a cut whenever you trade. This is true no matter which payment method you use.

However, when you pay with a credit card, you’re hit with credit card fees on top of the normal exchange trading fees.

Credit card fees vary from exchange to exchange. Before purchasing with a credit card, google your exchange’s fees to understand what you’re getting into.

For example, to buy cryptocurrencies on Coinmama with a credit card, you have to pay:

  • Exchange rate spread: 2%

  • Commission fee: up to 3.9%

  • Credit card fee: 5%

All these fees are built into the trade price, so you may not even realize how much you are losing unless you compare it to the true exchange rate.

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Let’s say you want to buy some bitcoin. If you wanted to invest $1,000 in bitcoin through Coinmama, you’d pay:

  • $20 on the exchange rate

  • $39 commission fee (for non-loyalty members)

  • $50 credit card fee

In other words, you’d need a 10.9% return on investment just to break even on these fees.

But exchange fees are only one part of the equation. It gets even worse.

Cash advance fees

Chase, Capital One, American Express, Citi and other major American credit card issuers treat cryptocurrency purchases like cash advances.

So on top of the exchange’s fees, you’re also hit with a cash advance fee from your bank.

Cash advance fees vary by institution, but Chase and Citi, for example, charge $5 or 10% of the cash advance, whichever is greater.

So, in our $1,000 bitcoin investment example, you’re looking at an additional $100 cash-advance fee on top of the $109 in exchange fees.

In other words, by using a credit card, you’re kissing goodbye more than a fifth of your investment to fees.

To make matters worse, cash advances do not have grace periods like regular credit card purchases, which means interest starts accruing from the moment you make your purchase.

The moral of the story: To avoid expensive surprises, call your credit card company and ask how they handle cryptocurrency purchases.

Other fees

When you use a credit card to buy cryptocurrencies from exchanges based outside the U.S., you can tack on an additional foreign transaction fee — typically 3%.

Because of this, it’s a good idea to check an exchange’s location before making a purchase.

If you use a card with no foreign transaction fees — such as the Chase Sapphire Preferred or Capital One Venture — you can avoid them.

Daily limit

Some exchanges have daily limits on how much crypto you can buy with credit cards. For example, on the Bitpanda exchange, credit card deposits max out at about $3,050 per day.

In addition to the exchange’s daily limit, you also have to keep an eye on your card’s limits.

Pros and cons of buying crypto with a credit card

man holding two chalkboards with Pro and con

J.K2507 / Shutterstock

Pros

There aren’t really any pros to paying for crypto with a credit card.

Normally, credit cards offer rewards points and special protections. But since credit card companies treat crypto purchases as cash advances, you don’t accrue those benefits.

Cons

When you use a credit card, you’re slammed with multiple fees. These fees are not associated with other payment methods like ACH transfers. To see a positive return on investment after paying these fees, you must dig yourself out of a deep hole.

Other considerations

Mousetrap and bitcoin coin. Cryptocurrency scam or fraud concept.

Vitalii Vodolazskyi / Shutterstock

Before purchasing cryptocurrencies with a credit card, consider these other important factors.

Scams

Buying cryptocurrency online is still a foreign concept to millions of rookie investors. That makes them easy prey for fraudsters.

Before diving into the world of cryptocurrencies, it’s important to familiarize yourself with common scams.

One such scam involves fake crypto exchanges disguised as legitimate websites. If you fall victim to online credit card fraud, your card’s fraud protection should cover you, but it’s best to use caution and keep it from happening in the first place.

Debt

While it’s exciting to ride the crypto wave, it is still an extremely volatile investment. Avoid investing money you can’t afford to lose. If your only way to purchase crypto is by racking up credit card debt, odds are you can’t afford to lose.

Not only is going into debt to buy crypto risky, it also can pull down your credit score. Holding a higher credit card balance increases your credit utilization, which hurts your credit score.

If you plan on taking out a mortgage, auto loan or personal loan, the debt you built up with your crypto purchase can indirectly affect the rates you qualify for.

Restrictions

Some exchanges have special rules for credit cards. If you don’t read the fine print before purchasing, you may find yourself in a sticky situation.

Author’s note: I once used my card to purchase Bitcoin on eToro, planning to immediately transfer it to a secure hard wallet. After buying, I realized credit card purchases cannot be transferred off the exchange for 60 days. Oops!

Crypto as a credit card reward

Gift Card Voucher Coupon Graphic Concept

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Buying cryptocurrencies with a credit card is a bad idea, but you can use your card to get your hands on crypto in other ways.

One way is with a crypto rewards credit card. These cards are similar to traditional rewards cards, but instead of earning cash back or airline miles, you earn crypto (or you can redeem your rewards points for them).

You can also use a cash-back rewards card, then use your cash rewards to buy crypto.

Written by Jane