Cryptocurrency has been around in some form for more than a decade, but in the last few years has it become more mainstream. Although cryptocurrency is a highly volatile investment, many Canadians are interested in its potential.
One common question as people learn more about digital currencies is whether you can buy crypto with a credit card. Yes, you can. But the process isn’t simple, and it can come with some fees.
How to buy Bitcoin and other crypto with a credit card
While it’s possible to buy cryptocurrency with your credit card, it’s not a direct process. You can’t actually charge the purchase of Bitcoin, Dogecoin, Ethereum, or other cryptocurrencies directly to your regular credit card. You’d have to go through an intermediary source first, such as a crypto exchange.
Cryptocurrency exchanges that accept credit cards
Some cryptocurrency exchanges allow you to use your credit card to buy Bitcoin and other digital currencies. This is convenient, but tends to come with significant fees.
Crypto exchanges that accept credit cards include:
- MyBTC.ca. This Canadian cryptocurrency exchange accepts both Visa and Mastercard. Charges are processed immediately, but each transaction incurs a fee of 9.75% of the purchase amount, charged in Canadian dollars.
- TrustWallet.com. Partnering with Simplex, TrustWallet allows account holders to buy up to $20,000 USD worth of crypto in a single transaction using their credit cards. Simplex charges a fee between 3.5% and 5% of the transaction value, and there’s a minimum fee of $10 USD. Charges are made in US dollars, and you’ll pay a fee if you use any other currency.
- CEX.io. This crypto exchange allows you to purchase a variety of cryptocurrencies with your credit card, but a 2.99% fee applies and you’re charged in U.S. dollars.
What to know about buying crypto with a credit card
Even though it’s possible to buy Bitcoin and other currencies with a credit card in Canada, it’s important to consider a few caveats before you start to finance your investments in this way.
Not all banks allow crypto transactions
The biggest concern is arguably how banks view crypto transactions. Some financial institutions see cryptocurrency purchases as having more potential for fraud or money laundering than other types of transactions. As a result, they may block you from using your credit card to buy crypto. Even though you may have good intentions and the ability to pay off your balance right away, your bank may not allow these transactions.
Crypto exchanges charge fees
Many cryptocurrency exchanges charge a commission or service fee when you use a credit card to fund your account. While some fees are as low as 2.99%, others go as high as 9.75%. Those fees add up quickly, so the convenience of paying with a credit card may not be worth the extra cost.
You may pay cash advance penalties
Some credit card issuers consider cryptocurrency purchases to be cash advances — and as such they typically come with higher fees, higher interest rates than regular purchases, and no interest-free grace period. For example, you could pay a one-time fee of $3.50 to $5 for the transaction, plus you’d be charged a cash advance interest rate from the day you make the purchase.
You may pay foreign exchange fees
Many credit cards in Canada charge a foreign transaction fee of 2.5% whenever you make a purchase in a currency other than Canadian dollars. If the cryptocurrency exchange charges the processing fee in U.S. dollars, you’ll pay an additional 2.5% — plus the credit card’s exchange rate.
You may not earn rewards
If you have a rewards credit card that offers cash back or travel points, your cryptocurrency purchases may not qualify for the rewards. Be sure to check the terms and conditions on your credit card to determine if you can actually earn points, miles or cash-back in exchange for buying crypto.
Is buying cryptocurrency with a credit card worth it?
Buying crypto with a credit card might be convenient and allow you to get into the market immediately, but the fees are typically high, the debt will have a high interest rate, and, in general, cryptocurrency is a risky investment.
To come out ahead, you’d have to hope that your investment gains will be higher than the fees you’re paying. Since nothing is guaranteed, you’d essentially be gambling. If things don’t turn out in your favour, you’d still have to pay off your credit card bill at the end of the payment period — or watch that debt grow.
Other ways to buy cryptocurrency
Using a credit card to pay for cryptocurrency likely won’t make sense for most people. Fortunately, there are other ways to buy cryptocurrency that will cost you much less in fees, including:
- Bank transfer or wire transfer.
- Interac e-transfers.
- Debit card.
- Cash (at cryptocurrency ATMs).
Remember, each method of payment may come with its own fees, and different crypto exchanges charge different fees. Before buying crypto, be sure you understand the cost of your transaction.
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