If you’re interested in buying cryptocurrencies but don’t have the funds available to do so, one way to get around this is by using your credit card. However, before you make that purchase, you should be aware that there are some risks involved and “buying crypto on a credit card” isn’t as easy as it sounds. Here’s what happens if you buy cryptocurrency with a credit card:
Interest Rates and Fees
The interest rate and fee that you’ll pay on a credit card can vary significantly, depending on which credit card you choose. As per SoFi’s experts, “Some cards will charge a higher interest rate or higher fees than others, so it’s important to be aware of what your specific circumstances are when choosing which card to use.”
For example, some cards charge no annual fee and offer lower APRs (annual percentage rates). Other cards might have an annual fee but come with higher APRs. There are also some special conditions for crypto transactions made with credit cards, such as foreign transaction fees or cash advance fees. You may also see different types of interest rates: fixed and variable APR (annual percentage rate) are common terms used in this industry; premiums or introductory offers refer to low-interest promotional rates offered by some banks during the first year after opening an account.
Statement Credit
If you buy a cryptocurrency and it increases in value, you will get a statement credit for the amount spent. The same applies if it decreases in value. In either case, there are pros and cons to this situation.
If you’re not sure how much cryptocurrency is going to be worth in the future, this is a good option because then all your money goes toward paying off your balance instead of interest charges from carrying an open balance on your card. As long as the price of crypto continues to increase or stay stable, this method can save you money by avoiding interest charges while at the same time allowing access to more funds if needed (just remember that any cryptocurrencies purchased with credit cards may potentially have high fees).
Advantages of Buying Cryptos on a Credit Card
- You don’t need to have funds in your bank account to buy crypto. This means if you don’t have enough money in your bank account but want to buy some cryptocurrency, then just pull out the credit card and start buying!
- You can buy crypto with a credit card in any country. It doesn’t matter where you are; all that matters is which bank/credit union offers this service and how much interest they charge for doing so.
- If privacy is important to you (and it should be), using a prepaid debit card might not be ideal because it requires identification verification—but buying crypto on a credit card does not require ID verification upfront.
Disadvantages of Buying Cryptos on a Credit Card
- Interest rates are typically pretty high. If you don’t pay off your credit card balance every month, it can be very expensive to carry a balance on your card.
- Crypto exchanges charge fees for almost every transaction and service provided. Even if you buy crypto with cash, there might be a fee associated with transferring the money into or out of your account. These fees can add up quickly depending on how often you trade digital currencies and what kind of deals they offer their customers (or don’t).
Now that you know the advantages and disadvantages of buying cryptos on a credit card, you will be able to make an informed decision.