Can You Buy Crypto With a Credit Card? Yes, but Get Ready To Pay Fees

Vault’s Viewpoint

• Not all credit card companies authorize cryptocurrency purchases. Check with your credit card company beforehand since some completely block or limit cryptocurrency purchases. It’s also important you make sure the cryptocurrency exchange accepts credit card payments too.
• Your credit card company will charge fees. The fees can run high with these purchases, if they’re allowed. Plus, the cryptocurrency exchange likely has a fee for a credit card payment.
• The purchase may incur more interest charges. Your credit card company may treat a cryptocurrency purchase as a cash advance. If this happens, you start accruing interest from day one of the purchase, with no grace period. Cash advances typically have higher annual percentage rates (APRs) too.

Pros and Cons of Buying Crypto With a Credit Card

No matter how comfortable you are with cryptocurrency, purchasing it with a credit card has a few advantages, but also a few major drawbacks.

Pros

• Credit cards offer a major convenience for purchasing crypto. However, if you’re only making the purchase with a credit card based on convenience, consider using a debit card.
• You can still purchase crypto even if you’re short on cash (or don’t want to use your cash).
• There could be an extra layer of security with a credit card transaction, versus purchasing through a bank account.

Cons

• The fees can quickly balloon. Some credit card companies consider this purchase a cash advance, so you’re charged cash advance fees, and interest starts accruing from day one. The issuer may also charge a foreign transaction fee if it’s not a U.S.-based exchange. 
• The crypto exchange may charge a fee too. When you trade dollars for cryptocurrency, the exchange may charge a percentage of the transaction (on top of your credit card fees).
• You’re increasing your credit utilization, or the amount of credit you use versus the amount of credit extended to you. If you’re using too much credit without paying it off each month, it can ding your credit score.
• You’re taking on debt. Unless you pay your balance within the month, your purchase will be subject to interest charges. This means you’re paying interest charges on top of a volatile purchase, and it’ll increase the pressure of getting a return on your investment.
• You might not earn credit card rewards. If your credit card considers the purchase a cash advance, it won’t earn cash back, points or miles.

How To Buy Crypto With a Credit Card

Buying crypto with a credit card isn’t simple. You have to go through a few steps before you can make it happen.

1. Research Your Credit Card Rules

First, find out if your credit card authorizes cryptocurrency purchases. If it does, it’s a good idea to know what fees it charges, such as cash advance fees or foreign transaction fees. It’s not only fees you should inquire about, but check what interest rate it’s subject to if it’s classified as a cash advance and not a regular purchase.

2. Confirm With the Exchange

Next, know which crypto exchange accepts credit card payments—specifically for your type of credit card (some only accept Visa and Mastercard, for example). Take note of any fees the exchange charges for credit card purchases.

3. Fund Your Crypto Exchange Account

Once you’re ready to move forward with the purchase, you have to link your credit card to the crypto exchange account. At this point, it should act like a normal checkout process, and you complete the purchase as normal.

4. Pay Off the Purchase As Soon as Possible

If possible, pay off the credit card balance as quickly as possible so you can avoid the costly interest charges on top of all the other fees associated with it. Remember, if it’s categorized as a cash advance, the interest starts accruing from day one of the purchase.

What Is Cryptocurrency?

Cryptocurrency, often referred to as crypto for short, is a digital or virtual form of currency. It uses cryptography to secure transactions, which means the transactions can be anonymous. The two parties involved in the transaction have no connection to one another, but they don’t need a third-party intermediary either. Like real money, it fluctuates in value, and you can use it to pay for physical goods or services.

Unlike our current paper currency though, this digital currency doesn’t rely on banks for verifying transactions. It’s considered a peer-to-peer transaction because anyone—in theory—can send payments to one another. And unlike paper currency, there is no physical money exchanged in the real world. Every transaction takes place as a digital entry in online databases. Cryptocurrencies must be stored in digital wallets too.

One method, and likely the most popular, for paying for cryptocurrency is through electronic transfers from your bank account. But as cryptocurrencies have grown since their inception in 2009, there are now other forms of payment you can use—including a credit card in limited cases.