Buy Bitcoin With Credit Card : The process for buying bitcoin with a credit card is similar to the process for buying it with a debit card or via an automated clearing house (ACH) transfer. You need to enter your credit card details with the exchange or online trading firm and authorize the transaction. In general, however, buying bitcoin with a credit card is not a good idea. There are a couple of reasons for this.
How to Buy Bitcoin With Credit Card
First, not all exchanges allow the purchase of bitcoin with a credit card due to the associated processing fees and risk of fraud. This decision may act in the best interest of the customers. This is because credit card processing may incur additional charges on such transactions. Thus, in addition to paying transaction fees, you will end up with processing fees that the exchange can pass on to you.
Another reason is that credit card purchases can be expensive. Credit card issuers treat bitcoin purchases as cash advances and charge hefty fees and interest rates on such advances. For example, American Express and Chase both count cryptocurrency purchases as cash advance transactions. Thus, if you purchase $100 worth of bitcoin using an American Express card, you will pay $10 (the current cash advance fee for such transactions) plus an annual percentage fee of 25%. What’s more, the credit card company limits you to $1,000 worth of bitcoin purchases per month.
An indirect way to buy bitcoin using a credit card is to get a bitcoin rewards credit card. Such cards function like your typical rewards credit card, except that they offer rewards in the form of bitcoin. Therefore, they invest the cash back earned from the purchase in bitcoin. An example of a bitcoin rewards card is the BlockFi bitcoin rewards credit card. Be aware, however, that the annual fee for these cards can be very high and there may be additional costs associated with converting fiat currencies to crypto.
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Alternative Ways to Buy Bitcoin
Bitcoin ATMs work like an in-person bitcoin exchange. Individuals can put cash into the machine and use it to buy bitcoin which is then transferred to an online wallet for users. Bitcoin ATMs have become increasingly popular in recent years—even retail giant Walmart Inc (WMT) is testing a pilot program that would offer its customers the option to buy bitcoin. Coin ATM Radar can help to track the nearest machines.
However, ATMs are an expensive option. There are two fees associated with ATM bitcoin purchases: a purchase fee and a conversion fee for converting fiat currency into bitcoin. Both the charges are quite high as compared to other options. For example, the average worldwide purchase fee at bitcoin ATMs is 8.4% (of the purchase amount) and 5.4% for sales at ATMs.
Unlike decentralized exchanges, which anonymously match buyers and sellers and facilitate all aspects of transactions, there are some peer-to-peer (P2P) exchange services that provide a more direct connection between users. Huh. LocalBitcoins is an example of such an exchange. After creating an account, users can post a request to buy or sell bitcoin, including information about payment methods and prices. Users then browse through a list of buy and sell offers, choosing the business partners they wish to transact with.
LocalBitcoins facilitates certain aspects of trading. Although P2P exchanges do not offer the same anonymity as decentralized exchanges, they do give users the opportunity to shop around for the best deal. Many of these exchanges also offer rating systems so that users have a way to evaluate potential business partners before making a transaction.
Due to the uncertainty surrounding the regulatory status of the cryptocurrency, very few mainstream brokerages offer bitcoin buying and trading capabilities. Robinhood Markets, Inc. (HOOD), an app popular with retail investors, is an exchange that offers crypto trading facilities. It charges a 0% commission for cryptocurrency trades and purchases and makes money from payments for order flows, passing its trading volume to other trading platforms or brokerages.
The absence of commission fees can be an attractive prospect for beginners, but there are some catches to that proposition. Firstly, Robinhood does not have the breadth of features and coins offered by major crypto exchanges like Coinbase. Robinhood had enabled trading on its platform for seven cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, Bitcoin SV, Dogecoin and Ethereum Classic. Conversely, you can trade over 100 cryptocurrencies on Coinbase. The exchange also offers different order types to reduce risk. and compensate for losses in the course of business.
The Robinhood platform does not even have a hosted wallet. Therefore, if you want to buy cryptocurrencies through Robinhood, you will need to take into account the additional costs for the online wallet provider.
Article Sources : investopedia.com