With the availability of multiple payment options, buying crypto in 2022 is now easy. The credit card payment option is the preferred method for many investors. Credit cards offer seamless purchases and high security.
How to buy crypto with a credit card?
It is an easy process to buy crypto using credit cards. You need to log in to a crypto exchange, fill in your contact details, complete the KYC steps, and finally buy or deposit money using your credit card to invest in the crypto of your choice.
Not all crypto exchange platforms offer the ability to buy crypto using credit cards. Even if a platform allows such transactions, you need to be mindful of extra fees associated with the transaction. The process for a user to buy crypto using a credit card also depends on the credit card issuer.
Fees that investors can expect
When buying crypto using a credit card, investors can expect to pay fees to the credit card issuer and the crypto exchange platform. Investors must perform their due diligence before buying a digital asset with a credit card. Investors should find the exact cost for each purchase. They need to research the monetary benefit before incurring the charge.
Crypto Exchange Fees
Crypto exchanges may charge service or commission fees for investors using credit cards to buy crypto. Vendors within crypto exchanges can also charge design fees to investors depending on a few factors. These factors include the purchase amount, vendor location, and the type of credit card used.
Credit card fees
Credit card companies allow investors to buy crypto and treat the purchase as a cash advance (cash advances involve users withdrawing money using a credit card). This process has many disadvantages.
There are many types of fees when using a credit card:
- Cash advance interest rates: Most credit cards have high-interest rates for cash advances. Cash advances often have interest rates of over 25%. These interest rates fluctuate due to the volatile market. The interest will begin from the day of purchase and will continue to accrue till the credit is paid. Credit card holders have at least 25 days to pay the regular charge before accruing any interest.
- Cash advance fees: Crypto purchases are treated as cash advances by some credit cards. As a result, investors are subjected to a cash advance fee for every crypto purchase. A typical cash advance fee is $10 or 5% of the transaction, whichever is greater. There are other fees charged by the exchange or vendor.
- No credit for bonuses or rewards: Cardholders are not eligible for any rewards or bonuses when they purchase crypto using a credit card, typically associated with fiat purchases.
- Lower credit limits: Compared to the overall credit limit, cash advances have a lower credit limit. As a result, investors hoping to make big crypto buys may find themselves limited by the cash advance terms and conditions.
Other credit card risks
- High fraud risk: There is a high potential for fraud if a vendor is not trusted and the cardholder sends sensitive information like credit card numbers and names.
- High investment risk: Investors can be in serious debt when investing in crypto with credit cards. This is because investors can quickly accrue fees and interest that investors cannot pay back. Investors can significantly increase their credit utilization rate. They are also at risk of losing their investment because of the volatile crypto market.
- Foreign transaction fees: If a vendor is from a different country, a foreign transaction fee may be applied as credit cards charge fees on foreign transactions.
Why buy crypto using a credit card?
There are a lot of advantages for investors to buying crypto with a credit card, including security, hassle-free process, and direct transactions.
Buying crypto using a credit card takes a few minutes to complete. This process becomes instant once investors have linked their credit card with their trading account after the first purchase.
Credit cards allow investors to borrow money when making a crypto purchase. This advance is a good option for those planning to make a big trade but does not have the financial capacity. However, investors should exercise caution since cryptos are highly volatile and investors could lose big quickly.
Credit cards have been one of the foundational payment methods on crypto exchanges. Credit card payment had proved to be a secure choice long before other payment options became available. Credit cards have high-security features like multi-factor authentication, and only verified accounts are allowed to transact.
While it is easy to buy cryptos using a credit card, it is vital to remember that cryptos are subject to high fluctuations in value and price. Investing in cryptos should not be made on impulse despite the ease of purchasing them.
Investors should consider the pros and cons before buying crypto using a credit card. High fees are often associated with credit card crypto purchases. These high fees can significantly reduce your return on investment. It is advisable to contact your credit card representative to learn about all the risks and fees involved when purchasing crypto. Investors should also look for a crypto exchange offering the best credit card rates.
ZebPay can help investors decide the best crypto to invest in in India. You can buy BTC with INR and other major cryptos on the ZebPay crypto exchange. ZebPay offers a reliable and secure platform for investors to trade crypto.