Can I buy cryptocurrency with a credit card?
Credit cards are one of the channels through which fiat currencies can be used to buy cryptocurrencies.
While this method is quick and easy, it also comes with risks.
This article will introduce you to the pros and cons of using a credit card to buy cryptocurrencies and the associated fees.
For various reasons, many users prefer to use credit cards for transactions. You might also consider taking this approach.
When buying cryptocurrencies, some users prefer to use wallets or bank transfers. These methods incur lower costs but may take too long for users who value convenience and speed. In this case, a credit card is a way to go. At Binance, you can use VISA or MasterCard to buy cryptocurrencies with daily fees. Additionally, you can use bank transfers, fiat top-ups, and e-wallets to buy cryptocurrencies on Binance.
To purchase cryptocurrency with a credit card, it is important to verify that the credit card issuer and payment network support such transactions. Credit card issuers prohibit cardholders from conducting cryptocurrency transactions for a variety of reasons. Capital One, for example, banned cryptocurrency transactions, protecting cardholders from fraud and losses and from market volatility.
What are the types of credit card transaction fees?
Using a credit card incurs various transaction fees, which vary in size. We’ve listed some of the most common transaction fees below, depending on the situation.
1. Transaction Fees
Cryptocurrency exchanges charge a small fee when a user transacts with a credit or debit card. This fee is usually slightly higher than other common payment methods such as bank transfers. Binance charges the lowest handling fee in the industry, with a maximum of only 2%. Banks and credit card issuers will also charge other additional fees.
2. Cash advance
Cash advance refers to the direct debit of cash from the credit card issuer. When prepaid, you will be charged a 3-5% fee. For example, a $200 cash advance would incur a fee of $6-10.
Some credit card issuers process cryptocurrency transactions as cash advances. American Express, for example, classifies cryptocurrency transactions as cash advances and charges them accordingly. When purchasing, you need to pay $5 or 10% of the transaction amount, whichever is higher. In other words, if you buy $1,000 in cryptocurrency, you pay a $100 fee to the credit card issuer.
If you do not wish to pay these fees, you may consider using the Binance platform. Binance only supports VISA and Mastercard, so users do not need to pay cash advance.
3. Overseas transaction fee
When using a credit card to buy cryptocurrencies in US dollars on platforms outside the United States , foreign transaction fees are often incurred. The same fee applies when purchasing cryptocurrencies in other fiat currencies using a domestically issued credit card. Usually the overseas transaction fee is 3% of the transaction amount. That is, when you buy $1,000 in cryptocurrency, you need to pay a $30 fee.
Why buy cryptocurrency with a credit card?
We’ve covered the processing fees that come with credit card transactions, and here’s a list of the advantages of using a credit card to buy cryptocurrencies. This approach often does more good than harm.
1. With a credit card, you can invest even without cash on hand.
Every cryptocurrency user knows that market conditions change rapidly. It may only be a few days before you can buy at the bottom or take over at a high price. Maybe you won’t get paid until next week. But with a credit card, you don’t have to worry about running out of cash. As long as you make timely repayments at the end of the month, you can avoid the credit card issuer from accruing interest.
2. Instant transactions
For novice buyers or investors, buying cryptocurrencies with fiat via credit card is very convenient, and transactions can be completed in seconds.
Conversely, wire or bank transfers tend to take three to eight days. Therefore, the cryptocurrency cannot be delisted from the platform until the transaction is completed. For investors looking for quick dips in a bear market , using a credit card for instant transactions is ideal.
3. Easy to get started
The trading methods of advanced cryptocurrency trading platforms are often confusing. Credit card payments are an ideal payment method for beginners who don’t want to struggle with this. Everyone is familiar with the credit card payment process, just enter the card number, expiration date and CVV verification code. In addition, cryptocurrency exchanges that support credit cards tend to be intuitive and easy to operate.
4. Stake tokens to earn rewards
Many people believe that when buying cryptocurrencies with a credit card, all transaction fees add up to offset income. Actually, it depends on how you invest with cryptocurrencies. Today, many cryptocurrency financial products, including staking, have considerable income. For some, these products can bring in good passive income. For example, you can easily buy cryptocurrencies with a credit card, then stake your tokens on Binance Money and earn up to 20% annualized yield.
What are the risks of buying cryptocurrency with a credit card?
While learning about the many advantages of buying cryptocurrencies with a credit card, you should also be aware of the potential risks associated with the process.
1. Credit card information may be leaked
Today, the cryptocurrency market is full of exchanges that boast exclusive perks. Some of them are legitimate platforms, but many others are scam platforms, targeting novice traders or users eager to make money. Although credit cards have strong fraud prevention mechanisms, each user should still have the ability to identify and avoid falling into the trap of fraud. Binance advises users to do due diligence before conducting any cryptocurrency transactions.
2. Credit scores may be affected
Credit utilization refers to the amount of credit you use. This is also an important factor in credit scoring. The more you use it, the higher your credit score, but overuse can also lead to a lower credit score. The worst-case scenario is that cardholders fail to pay off their monthly balances on time, resulting in a declining credit score. To avoid this from happening, we recommend that users invest within the risk range they can afford. Beginners, in particular, should start small and consider investing with a cost-average (DCA) strategy.
Note: Credit card issuers and banks have daily purchase limits for cryptocurrencies. Users who buy cryptocurrencies in large amounts need to check for overages. Once exceeded, the transaction will be rejected.
How to buy cryptocurrency with credit card?
Have you checked the issuer of your credit card carefully? If you’ve done your research, you can follow the steps below to buy cryptocurrency on Binance with your credit card.
- Step 1: Log in to your Binance account, click [Buy Coins with One Click], and then click [ Credit/Debit Card ].
- Step 2: Select fiat currency and enter the amount of fiat currency used for the purchase. The system will automatically display the number of tokens available for purchase.
- Step 3: Click [Add New Card] and enter the specific information of the credit card. Please note that you can only pay with a credit card in your name.
- Step 4: Enter the billing address and click [Add Bank Card].
- Step 5: Check the payment details and confirm the order.
- Step 6: Go to the bank’s OTP transaction page and follow the on-screen instructions to verify the payment.
To invest in cryptocurrencies using the average cost method (DCA) or automatically buy cryptocurrencies with a credit card, you may consider using the Scheduled Investment feature. You can make a weekly, bi-weekly or monthly investment plan and set the cryptocurrencies to buy regularly and how much to buy. To learn more, read How to Grow Your Crypto Portfolio with Scheduled Investments.
There are many ways to buy cryptocurrencies, and credit card purchases are just one of them. Although credit card transactions incur higher transaction fees, transactions are cashless and quick and easy. Users who prefer low fees can consider using bank transfers. However, bank transfers are not as fast as credit card transactions and often take days to complete. Before choosing the right payment method, it is important to understand the advantages and disadvantages of each method.
Ready to start your crypto journey with Binance?
To get started, sign up for a Binance account or download the Binance cryptocurrency trading app . Next, verify the personal account. Once your account is verified, you can use fiat to buy cryptocurrencies on Binance. The three purchase methods are: bank transfer, bank card channel and digital wallet option.
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