How to buy Bitcoin with a credit card

Buying Bitcoin with a credit card can be easy for first-time buyers, but it has drawbacks, including bigger fees and higher interest charges.

One prevalent method for purchasing Bitcoin involves using a credit card. Buying Bitcoin (BTC) with a credit card is one of the fastest methods. Many major cryptocurrency exchanges, including Binance, Coinbase, OKX and MEXC, accept credit cards. 

However, there are often additional fees to buy Bitcoin with a credit card, as well as Know Your Customer (KYC) checks to complete when first registering with a cryptocurrency exchange.

Additionally, not all credit card companies allow crypto purchases, with many credit card providers and banks usually limiting the value and frequency of cryptocurrency purchases.

Why buy Bitcoin with a credit card?

There are several reasons to buy Bitcoin with a credit credit, including:

Fast and safe transactions

Buying Bitcoin via a credit card is almost instant on major exchanges. It can be performed easily on a mobile device, allowing buyers and traders to quickly take advantage of market moves. In contrast, a bank account transfer might take several days to process, by which time the market and Bitcoin price may have changed.

Often, the cryptocurrency exchanges that accept credit cards are regulated and will use high levels of encryption. These exchanges will require KYC and Anti-Money Laundering (AML) checks for security and compliance. Although the checks don’t phase many cryptocurrency buyers, some privacy advocates in crypto might be reluctant to provide extensive personal information.

Purchasing Bitcoin with a credit card is a beginner-friendly option for new cryptocurrency investors already familiar with using their credit cards for online transactions. There may be some protection from the credit card company if something goes awry.

It’s important to note that there may be no protection, depending on the scenario. A fraudulent transaction on a cryptocurrency exchange where the buyer doesn’t receive the Bitcoin could be a situation where a card company will investigate the transaction and consider a chargeback, although there is no guarantee.

Straightforward withdrawals

Bitcoin buyers who subsequently sell their assets can quickly withdraw fiat funds to their bank account or credit card using a cryptocurrency exchange, depending on the exchange’s policies, supported withdrawal methods, and the user’s geographical location.

Nevertheless, not all exchanges may allow direct credit card withdrawals, and the procedure can include fees, withdrawal limitations and verification requirements.

Explore dollar-cost averaging strategies

A dollar-cost averaging (DCA) Bitcoin investment strategy involves buying BTC at fixed amounts at set intervals. Having a credit card saved on a cryptocurrency exchange for payment may make regularly executing this strategy simple in contrast to longer bank transfers.

However, using a credit card for a DCA strategy can have drawbacks. High transaction fees and potential interest charges on unpaid balances can erode investment returns.

Credit card spending limits may also restrict investment amounts, and not all exchanges support credit card withdrawals, complicating the reinvestment or withdrawal process. These factors can significantly impact the efficiency and cost-effectiveness of a DCA strategy when using credit cards.

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

Fees for credit card purchases

Buying Bitcoin with a credit card can be the most expensive method. Coinbase, for example, charges a 3.99% fee for credit card payments. Binance charges around 2%. Other fees to pay on an exchange include transaction or spread fees. These fees will vary from exchange to exchange.

Additionally, crypto buyers must also be aware of the fees their credit card charges. Using a credit card to buy Bitcoin may incur cash advance fees (charges for cash withdrawals using a credit card), and cash advances can incur interest from day one.

Of course, if a credit card balance is not paid off within the card’s timeframe, the balance will incur interest charges. Depending on the location of the buyer and the exchange, using a credit card to buy Bitcoin may incur foreign transaction fees.

Choice of cryptocurrency exchanges

Not all cryptocurrency exchanges accept credit cards to buy BTC and other cryptocurrencies, so this might limit a buyer’s choice.

Data security

Major exchanges usually implement stringent cybersecurity practices to protect user data, but some exchanges don’t have such standards and can be less legitimate. Hacks, cyberattacks and sketchy exchanges all expose customer and credit card data to illicit actors.

Credit score and finances

One’s credit score may be badly impacted by high credit card utilization. High credit balances can damage credit scores, and there are further significant risks if a cardholder does not pay off a balance or monthly payments and otherwise falls behind with credit card bills or other personal finances.

How to buy Bitcoin with a credit card

To understand how to purchase Bitcoin with a credit card, let’s use Binance exchange as an example. Please note that the steps involved in other exchanges will differ slightly depending on its user interface.

Step 1: Create and log in to the exchange.

Step 2: Navigate to the option to buy cryptocurrency.

Step 3: Select the card and fiat currency being used to fund the purchase and Bitcoin as the cryptocurrency to buy.

Step 4: Enter the fiat currency amount being spent. The amount of BTC in exchange for this amount should be auto-completed on the page. Prices can change during the time it takes to complete a transaction.

Step 5: The new credit card can be added using the “add new card” option for the fiat payment. The associated card address, expiry date and CVV code must be completed.

Step 6: Credit card users will be redirected to their card provider’s one-time password transaction page and must follow the instructions to confirm the payment.

Alternative methods for purchasing Bitcoin

In addition to credit card purchases, there are other ways to buy Bitcoin. A popular choice is to buy Bitcoin via cryptocurrency exchanges, which let customers utilize various payment options like PayPal, bank transfers and even cash deposits.

Peer-to-peer networks facilitate individual-to-individual transactions by offering a range of payment options, including cash-in-person trades. Another straightforward option to buy Bitcoin with cash or debit cards is via Bitcoin ATMs. Moreover, certain services allow users to purchase Bitcoin via prepaid cards or mobile payment apps.

Furthermore, wire transfers or automated clearing house transfers for Bitcoin purchases are made possible by cryptocurrency brokerage firms. Decentralized exchanges provide a peer-to-peer trading environment without intermediaries for individuals who value privacy.

Though each approach has pros and cons of its own, they all provide ways to obtain Bitcoin outside of conventional credit card transactions. Awareness of each option gives users the power to select the one that best suits their requirements and tastes.