November 27, 2022

Should You Buy Crypto With Credit?

Have you ever wondered, “can you use a credit card to buy crypto?” The short answer is yes but there are some hurdles you’ll need to deal with in order to make it work. The experts at SoFi state, “It is possible to buy bitcoin and other cryptocurrencies with a credit card. Depending on the exchange used and the rules upheld by your credit card issuer, several factors can come into play.”

 

Let’s discuss.

Finding a credit card

 

Most credit card issuers in the United States don’t allow their holders to buy crypto with the card. Others allow crypt purchases but charge fees. So the first hurdle you have to deal with if you want to use a credit card to buy crypto is finding a credit card that will allow you to do so.

Finding an exchange

 

The next hurdle you’ll need to deal with is finding an exchange that will let you use a credit card to buy crypto. Some of the major exchanges won’t accept credit cards. Others will but limit it to Visa and Mastercard.

Paying fees

 

Let’s say you find both a credit card and an exchange that will allow you to buy crypto using the card. While that may be convenient, it’s still wise to avoid doing because both the credit card and the exchange will charge fees.

 

While exchanges charge fees for transactions regardless, the amount goes up when you add in additional charges for using your credit card.

 

Then there is the problem of the fees the credit card company will charge for what they consider a cash advance.

Cash advance penalties

If you want to buy crypto with a credit card, first call the company and make sure they don’t treat the purchase like a cash advance. If they do, then you will need to deal with the following:

 

  • You will be charged a cash advance fee.
  • You will likely pay a higher interest rate.
  • There will be no grace period. Credit cards don’t charge interest on purchases during a grace period. Cash advances don’t have this grace period so you’d be charged interest from the first day.
  • Lower credit limit with some credit cards.
  • No rewards. Many credit cards will not give you cash back or other rewards since they consider crypto purchases to be cash advance equivalents.

Debt burden

Cryptocurrencies are very volatile. Credit card payments are not. You don’t want to take on a lot of debt to buy crypto only to see the crypto lose 50% of its value. You will still be on the hook to pay your debt to the credit card company.

 

Better ways to buy crypto

You can buy crypto with a bank account, a wire transfer, or by trading one type of crypto for another. Each of these methods is better than using a credit card.

 

Another great way to accumulate crypto is to use a credit card that offers crypto rewards.

 

A SoFi Credit Card allows you to do this. When you use this card, you will get 2% back. You can use this in conjunction with your SoFi Invest account to purchase cryptocurrency. It’s a great deal and will allow you to accumulate crypto painlessly.

 

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