Bitcoin and Other Cryptocurrencies—How To Buy Them
By now, basically everyone’s heard of cryptocurrency and Bitcoin fever has many looking for new and seemingly easy ways to get rich.
This article aims to dive deeper into the realities of actually buying Bitcoin and other cryptocurrencies.
In short, to purchase cryptocurrency, you’ll likely need to go through an exchange first—i.e. a website where you can trade one currency for another.
And, if you’ve come across an exchange that accepts card payments (as not all of them do) here’s what you need to know about purchasing cryptocurrencies with your credit card.
Trust us, it’s not so straightforward—you’ll want to learn all that you can about this to be able to make an informed decision.
So, first, let’s consider how credit card transactions are structured within the cryptocurrency buying process.
Buying Cryptocurrencies with Credit Cards
Credit Card Transactions
When it comes to credit card transactions, the payment will have to go through a third-party financial institution in order to be effectively authorized.
In practice, a standard credit card transaction for those who’d like to purchase Bitcoin or another cryptocurrency involves the following parties:
As such, buying cryptocurrencies with the use of credit cards extends to involve many more parties than is the case with, for example, Bitcoin transactions.
Aside from this, it’s important to remember that using your credit card to purchase cryptocurrency is not the same as going online to buy a new pair of shoes—it’s a lot more pricey and comes with greater risk.
A recent eToro (global investment platform) study found that 43% of millenial online traders trust cryptocurrency exchanges—that may not seem like much, but it’s actually more than can be said of their trust for the regular stock exchange.
With this increased interest in Bitcoin and other cryptocurrencies, many exchanges began providing their customers with the possibility to buy crypto coins with a credit card.
Seems like a good idea? Let’s find out.
Who Is Going to Let You Buy Bitcoin Using a Credit Card?
As a result of the associated risks, cryptocurrencies aren’t officially supported by governments or financial institutions.
Worse so, certain governments have warned their citizens about cryptocurrency investments and trading because the risk is so high.
Yet, there are still those who wholeheartedly disagree, indicating that the speculative nature of cryptocurrencies makes them a worthwhile addition to a long-term investment strategy.
However, for example, when it comes to the United States, finding a credit card issuer who is going to let you buy cryptocurrency is no easy feat.
In 2018, some of the most significant banks in the United States — Bank of America, Wells Fargo, TD Bank, Citigroup, Capitol One, Chase, etc. — all said “no” to enabling their customers to purchase cryptocurrencies using the cards they issue.
However, if you reside in the US and are looking to buy cryptocurrencies, certain smaller banks or credit unions may allow you to do so.
For instance, American Express gives you this option—nonetheless, only under strict regulatory requirements. They set an upfront daily ($200) and weekly ($1000) limit, which customers can’t exceed.
But, they also allow their US-based customers to link their cards to e-wallets to make cryptocurrency purchases.
This way, their customers have the option to make transactions with either an e-wallet or a credit card via select cryptocurrency exchanges that honor credit card transactions, (i.e. Coinmama, CEX.IO, Bitstamp, etc.).
The Benefits of Buying Bitcoin with Credit Cards
Contrary to certain industry sentiments, buying cryptocurrencies with a credit card comes with its set of advantages—like enabling the purchases to be made using fiat currencies.
Fiat money is a currency that doesn’t have any intrinsic value, it was simply established as money. It’s only valuable because a government maintains that this is the case, or because certain parties engaged in its exchange agree that it’s valuable.
Buying cryptocurrencies with credit cards is quickly becoming the most readily chosen option, thanks to its convenience.
Especially when you take into consideration that buying Bitcoin or Ripple, etc., using a bank or wire transfer can take anywhere from 3-8 days—which means that your investment won’t actually go through until the processing is completed.
Paradoxically, the longer a purchase takes (such as when it’s wired) the greater the risk. This is because an elongated process gives fraudsters the time to plan and execute hacks on the exchanges.
Therefore, the transaction speed associated with buying cryptocurrencies with credit cards makes this purchase form more secure than some of the other methods.
Buying Bitcoin using a credit card renders making investments quick, easy, and secure. As such, this option is especially favored by those who are pressed for time and want their transactions to be completed quickly.
On average, the exchanges and platforms that enable customers to purchase cryptocurrency using their credit cards place great emphasis on making their site’s user interface clean and easy to browse.
Additionally, if they work with a payment processor who offers checkout customization options and 1-click payments for returning customers, buying cryptocurrencies no longer comes with the hassle that it’s often associated with.
When looking to invest in Bitcoin, seek out an exchange that understands your needs and has rendered the payment process user-friendly and straightforward.
The more steps you have to take and the more pages you’re redirected to when making a transaction, the less comfortable the buying experience.
Usually, the more advanced cryptocurrency exchanges have an unnecessarily confusing purchasing process and might prove overly complicated for first time investors.
Note that, typically, the best exchanges will have a fully optimized checkout that doesn’t redirect you to another page or make you fill out time-consuming payment forms.
To avoid transactional frustration, research a few different options before making your choice.
The Bottom Line
Buying Bitcoin or other cryptocurrencies does come with a few risks. There’s no getting around it. And the purchase method you choose does make a difference when it comes to speed and security.
Bank wires can be cost-effective, but they can also take upwards of a week to successfully go through.
Whereas credit card transactions can be a bit more costly, but are also much more time-efficient. And, on top of that, credit card fraud protection helps eliminate your liability in case any issues arise.
So, in the end, we would recommend conducting diligent research to make sure that you won’t be scammed regardless of the payment method you choose.
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