The True Сost of Buying Cryptocurrency with a Credit Card: What They Don't Tell You About
Learning how to buy crypto with credit card might seem like an easy and convenient way of purchasing digital assets. Nevertheless, nothing is ever as simple as it looks, and behind this convenience, you can find hidden charges that are rarely mentioned and often come as a surprise. Let us find out a bit more about how to buy crypto with credit card and what downsides may be waiting for you.
Hidden fees
On the surface, purchasing cryptocurrency with a card is easy: you must enter your data, specify the amount and verify the transaction. The coins are deposited into your wallet and the process is complete. However, a few things tend to remain behind the scenes:
- Processing fee: Typically, payment systems charge up to 5% of the total amount for the transaction processing.
- Exchange fee: Many services claim minimal exchange fees, but the difference between the market price and the purchase rate may increase to several per cent.
- Conversion fee: In cases when the transaction is executed through a non-domestic platform, an additional conversion fee of 1-3% may be applied.
If you add everything up, extra costs for buying crypto with a credit card might reach 7-10% of unplanned expenses. So before deciding to dive into how to buy crypto with credit card, compare the fees with some alternative options.
2. The risk of transaction blocking
Cryptocurrency regulations differ across countries and financial institutions. Some banks closely monitor all crypto-related transactions and in some cases can even prohibit purchases of digital assets. Possible consequences include:
- Payment decline: The funds may get temporarily blocked, and the transaction will not go through.
- Blocking an account or a bank card: Some financial facilities can see crypto transactions as potentially risky and restrict using an account or a credit card, especially if the sum is substantial.
- Increased surveillance from tax regulators: Some regions closely follow cryptocurrency transactions made with a credit card, thus raising questions from tax authorities.
Explore the cryptocurrency policies of your bank before deciding how to buy crypto with credit card, as if there are certain restrictions or limitations, the process might require additional expenses and explanations.
3. Impact on the credit rating
Never forget that purchasing digital assets from a credit card can hurt your overall credit rating, especially if:
- You deplete a significant fraction of your limit: Elevated credit utilization can significantly lower your credit score.
- You do not possess funds to repay the debt right away: Purchases related to digital assets can begin accumulating interest right away if classified as a credit advance.
- You purchase too much in a short time: Financial institutions might see multiple transactions as speculative and change the terms of the loan.
This way, if you decide to start thinking about how to buy crypto with credit card, it is better to pay the debt immediately after finalizing all the transactions to avoid overpaying and exceeding the grace deadline.
4. Cryptocurrency does not have refund protection
One of the main risks of purchasing cryptocurrency with a credit card is no refund policy and lack of protection for the buyer. Frequently, banking institutions have certain buyer protection policies when purchases are made with a credit card, and you can open a dispute in case of fraudulent actions. However, cryptocurrency transactions do not fall in the category of protected items and all transactions are non-refundable.
- If you have transferred the assets to a fraudulent website, it will be impossible to retrieve them or receive a refund.
- If the platform you have acquired your assets from decides to suddenly block your account, it will be demanding to get your funds back.
Before initiating a transaction, it is vital to review the platform's rating and avoid operations with larger sums in the early transactions.
Is there an alternative?
If you have studied the commissions and consider that the process of how to buy crypto with credit card gets too expensive or risky, look at some other alternative methods that might become the best choice for you:
- Bank transfers: The process takes longer but typically has low fees or no fees at all.
- Using a debit card: Many exchange platforms support this payment option with much lower fees than a credit card.
- P2P services: One of the most convenient ways to acquire digital assets at favorable prices, as you can buy the coins you are interested in directly from other users, with no involvement from banks.
Buying crypto with a credit card is a fast and convenient way, but you have to fully acknowledge all the extra commissions you have to pay and the possible risks you are subjected to. The decision always depends on you. Compare the expenses, weigh all the pros and cons and decide whether you are going to learn how to buy crypto with credit card or choose a more cost-efficient alternative.