Can You Buy Crypto With a Credit Card?
You can purchase cryptocurrency with a credit card if your card issuer and payment network allows the transaction type. You can check with your credit card issuer to find out whether they’ve blocked cryptocurrency purchases before initiating a transaction. Credit card issuers that do block the purchase of cryptocurrency have varying reasons. Capital One, for example, made the decision to decline cryptocurrency purchases to protect cardholders and will evaluate its position as the market evolves.The bank also prohibits using credit cards for purchasing non-fungible tokens (NFTs) “due to the limited mainstream acceptance and the elevated risks.”
How Does Buying Crypto With a Credit Card Work?
Before using your credit card to purchase cryptocurrency—or before purchasing cryptocurrency at all—you should know how the process works and the potential fees associated with it.
You May Have to Pay a Transaction Fee
The cryptocurrency exchange may charge a transaction fee when you use a credit card or a debit card to purchase cryptocurrency, which they will disclose to you at the time of your transaction. Using ACH (your checking account and routing information) takes a few days to post to your account, but it’s usually free. You’ll have to make a choice between fast and expensive, or slow and free. Rushing to buy because you think prices may go up again may not be the wisest decision.
The Purchase May Be a Cash Advance
Some credit card issuers, if they allow cryptocurrency purchases, treat them as cash advances. In that case, you’ll pay a cash advance fee on top of any transaction fee the cryptocurrency exchange charges. The typical cash advance fee on a credit card is either $5 or 10% of the amount of the transaction, whichever is greater. So, if you use your credit card to purchase $1,000 of cryptocurrency, you could pay a $100 fee to your credit card issuer. You’ll also be subject to the higher cash advance APR on your credit card and you won’t get a grace period, even if you use a credit card with a zero balance. If this is the case, you’ll start incurring interest from the day you make the transaction.
There Could Be a Foreign Transaction Fee
If the cryptocurrency exchange is based outside the U.S., you could incur a foreign transaction fee. Foreign transaction fees, charged by your credit card issuer, are typically 3% of the transaction amount. That’s a $30 foreign transaction fee for every $1,000 of cryptocurrency you purchase.
You May Have a Daily Limit
Depending on the platform, there may be a limit to the amount of cryptocurrency you can purchase. Check your account settings after logging into your cryptocurrency exchange account to verify your limits.
Drawbacks to Buying Crypto With a Credit Card
Purchasing and investing in cryptocurrency is often considered a risky move. While there are many benefits to purchasing cryptocurrency, when it comes to buying with a credit card, you should be aware of potential drawbacks.
Your Credit Card Information Could Be at Risk
Many cryptocurrency exchanges are scams and prey on people’s eagerness to earn a profit, so it’s important to research thoroughly before you make any cryptocurrency purchases. Of course, credit card fraud protection eliminates your liability for fraudulent purchases made on your credit card. Still, you want to be sure you’re not being scammed no matter what payment method you use.
Your Credit Score Could Be Impacted
Credit utilization—the amount of credit you use—is a major factor in your credit score. The more of your credit you use, the more it affects your credit score. Running up a big credit card balance on cryptocurrency is likely to be damaging to your credit score. It’s even worse if you charge more than you can afford to pay and fall behind on your payments.
