How advantageous is it to buy Bitcoin with a credit card?

The Bitcoin cryptocurrency is one of the fastest-evolving digital tokens based on decentralized principles. It was created with the purpose of offering an additional financial alternative to the current system, where institutions and governments wouldn’t have to be implied for the system to function.

Since 2009, Bitcoin has gained considerable attention from worldwide investors, reaching a market capitalization of over one billion as of today. It became a legal tender in El Salvador, expanded on a global scale, and provided financial opportunities for areas where banks were not available to most citizens.

However, along with all the success, the price of Bitcoin showed an out-of-this-world volatility given the limited supply and continuous demand, so make sure to protect your portfolio if you buy Bitcoin. At the same time, this old consensus mechanism, PoW, has made the network less efficient. But people still love it.

Acquiring Bitcoin can be done in several ways, but some may prefer to buy it with a credit card. But how profitable is this option?

What are the implications of using a credit card?

Buying Bitcoin with a credit card may be convenient, but you must consider a few factors before stepping in. For instance, you should expect exchanges to charge different factions from the transaction cost involving funding the account and the service.

You should also be wary of how easy it is to collect debt over time because Bitcoin is considerably volatile. You might pay interest for volatile investments, so it’s best to stay up-to-date with your risk rate and decide if it’s worth taking another sum for investing.

Finally, you must protect your investments because many crypto exchanges are risky. Choosing reputable companies is best, so research the best solution before jumping in to avoid getting your personal information stolen.

What are the steps of buying Bitcoin with a credit card?

Using a credit card to buy Bitcoin is pretty straightforward, but it implies research to find the best opportunities. First, you need to look for a credit card that supports the cryptocurrency’s purchase, because not all offer this service. Depending on the region, you might find more or less available companies, and you need to compare their fees to settle for the most advantageous option.

You also need to consult a few cryptocurrency exchanges because they must support the credit card company, too. Hence, they need to be connected for enhanced security and top-notch services. However, the transfer process may not be instant as banks want to ensure there’s no risk of fraud.

The last check-in process involves meeting KYC requirements by adding personal information, such as name, card number and billing address. After everything is completed, you only need to find the “buy Bitcoin” button and follow the steps to get Bitcoin.

Exchange account requirements

Working with crypto requires you to open an exchange account; depending on the service you choose, it might be more accessible or more challenging to do so. For instance, a decentralized exchange needs only the software to be downloaded, an account to be set and the recovery phase to be introduced.

On the other hand, centralized exchanges may need more steps to be checked. You should meet the KYC verification requirement provided by the authorities. Some of the details you need to provide include your full name, an identification document and a proof of address. Finally, a centralized exchange sets a minimum deposit to start your operations, ranging from $10 to $50.

Crypto is seen as a cash advance, so disadvantages appear

Leveraging a credit card for Bitcoin purchases is similar to a cash advance; at least, that’s how it seems for official entities. Hence, this activity presents a few downturns you must consider before opening a credit card account:

  • High-interest rate;
  • Foreign exchange fee;
  • Cash advance fee;
  • Lower credit limit;

Are there more advantageous ways to buy Bitcoin

As you can see, buying Bitcoin with a credit card might not be that efficient. Luckily, there are many other options. Regardless of what you choose, make sure to read all about the latest regulatory framework on crypto and the taxing rules in your region because they tend to differ.

You may want to try placing an order, as most crypto exchanges offer market and limit orders, but these limits can expand. Depending on the exchange, you can set a recurring purchase for every week or month as a way to invest in the dollar-cost averaging method.

You can also buy Bitcoin with PayPal, as the company embraced cryptocurrency investments with open arms. You can connect your debit card or bank account to the PayPal account and purchase it through a third-party provider. Or, you can buy Bitcoin directly from the Bitcoin account, but you should expect a transaction fee to appear.

You may also buy Bitcoin through the following:

  • A Bitcoin ATM, where you insert cash to buy the cryptocurrency that gets transferred to your online wallet;
  • A P2P exchange, where you create an account and post your request for other users to help finalize;
  • A brokerage that accepts famous cryptocurrencies;

What’s the best way to store your Bitcoins?

If you buy Bitcoin, you also need to store it somewhere safe. There are two options available  – a hot or cold wallet. Hot wallets are provided primarily online on apps that can be used on computers or smartphones. They are convenient and great for small amounts of cryptocurrency but not that safe, considering it’s easy for the exchange to be hacked and the funds to be compromised.

On the other hand, cold wallets aren’t connected to the internet and are considerably safer. They usually come in the form of a USB-drive device where the private critical security is stored, but they require some knowledge to be set up correctly.

Final considerations

Buying Bitcoin with a credit card seems to be a pretty popular option because it allows users more convenience and availability than other options. However, it may not be that efficient or profitable over time due to Bitcoin’s volatility and the multitude of legal framework requirements from the government. Still, there are multiple other ways to buy cryptocurrency, so you can choose the preferred one.