In recent years all the spotlights have been on cryptocurrency. Therefore, many individuals are finding new ways to purchase these volatile but high-return investments. One of the ways is through a credit card, which is an incredibly feasible option. However, is it worth the risk? This article discusses all you need to know about investing in crypto using a credit card.
Pros of Buying Crypto From a Credit Card
The ease of the transaction is the main benefit of using a credit card to purchase cryptocurrencies. Instead of transferring money from a bank account or waiting for a wire transfer to complete, you can quickly and conveniently buy cryptocurrency using a credit card. Also, if you often purchase cryptocurrencies, you may be eligible for cashback or reward points some credit cards offer.
Cons of Buying Crypto From a Credit Card
The hefty fees are one of the main disadvantages of purchasing cryptocurrencies with a credit card. Credit card providers regard purchases made with cryptocurrencies as cash advances, which often carry a higher interest rate than conventional purchases made with credit cards. Moreover, credit card providers often assess a cash advance fee which might equal 5% of the transaction value. The cost of purchasing cryptocurrencies with a credit card may soon build up.
The potential for fraud is another issue. There is no government regulation of cryptocurrencies, so there is no defense against theft or hacking. You might not be able to get your money back if your credit card details are taken during a cryptocurrency purchase. Certain credit card providers impose limitations on cryptocurrency purchases. Some credit card providers may outright forbid buying cryptocurrencies. In contrast, others may restrict the number of transactions within a certain period or limit the purchase on a single transaction.
Tips for Buying Crypto from Credit Card
To reduce the risks and expenses involved in the transaction, bear the following in mind if you want to purchase cryptocurrency using a credit card:
- Use a credit card with low interest and no cash advance fees. It can assist in lowering the transaction’s cost.
- Buy cryptocurrencies only from trustworthy vendors. Be sure you’re buying from a reliable exchange or vendor by doing homework.
- For increased security, utilize two-factor authentication. It can help keep hackers away from your credit card details.
- Think about getting a different credit card just for buying cryptocurrencies. It might make it simpler for you to keep records of your cryptocurrency spending and spot any fraudulent behavior.
- Be mindful of the tax implications of purchasing cryptocurrencies. Purchasing cryptocurrency is sometimes seen as a taxable event. Thus, any earnings from selling it may be subject to taxation.
In conclusion, even if purchasing cryptocurrency using a credit card is possible, it may not be the ideal choice. Cryptocurrency is less advantageous due to the high fees and dangers involved than conventional payment methods like bank transfers or wire transfers. But, if you want to use a credit card to purchase crypto, take the required security measures to safeguard your data and reduce your expenditures.