Cryptocurrency News Update

Cryptocurrency is rapidly becoming a highly valuable ‘asset’ in investment portfolios worldwide. As reported by CoinMarketCap, the combined value of all existing cryptocurrencies exceeds $2 trillion — and it continues to grow.

Both traditional financial institutions and new financial service companies have taken notice, aiming to attract new clients with cryptocurrency offerings. Instead of receiving a credit card that provides travel perks or cash rewards, there are now cards that give rewards in the form of cryptocurrency.

In this context, let’s explore how these new credit cards function, what to expect, and how to determine if a crypto credit card is suitable for you.

How crypto credit cards operate
Crypto credit cards function just like any other rewards credit card available: you earn rewards as you make purchases using the card. In this case, however, your rewards are given in cryptocurrency. It’s important to understand that the method of processing and awarding cryptocurrency can vary from one card to another.

For instance, the BlockFi Rewards Visa Signature Credit Card allows cardholders to earn:

• 1.5% back in cryptocurrency on all eligible purchases
• 2% back in cryptocurrency on all eligible purchases that exceed $30,000 annually

However, since numerous cryptocurrencies can be held, the card actually rewards users with BlockFi Cryptocurrency Rewards Points. After the points are credited and the cardholder account is in good standing, BlockFi allows the points to be converted into the cryptocurrency of your choice.

On the other hand, the Gemini Credit Card directly deposits cryptocurrency into your Gemini account each time you use your card — providing immediate access to your rewards instead of waiting for a monthly statement.

When researching crypto credit cards, it’s essential to understand the reward process for cardholders. It could involve a few more steps compared to traditional credit cards, but it might be worth the effort if you’re interested in investing in cryptocurrency.

Also, be aware that not all of these options are purely credit cards; there are several debit card alternatives available, like the Coinbase and Crypto.com debit cards. So, if you prefer not to use credit cards, you can still benefit from earning more cryptocurrency through your purchases.

Nonetheless, keep in mind that these crypto cards operate like regular credit cards, meaning you must pay off the balances monthly to avoid interest charges or late fees. While most purchases are made and settled in US dollars, some cards enable you to make purchases (and pay off your card) using cryptocurrency from your linked account.

Moreover, using these cards will impact your credit score similarly to traditional cards, and there may be associated fees such as annual charges or transaction fees. It’s important to review the terms and conditions for each card to familiarize yourself with the applicable rules.

What to keep in mind with a crypto credit card

Owning a crypto card is somewhat more complex than possessing a traditional credit card, so here are several factors to consider before applying:

• Taxes: One appealing aspect of a crypto card is the chance to earn rewards that may appreciate in value, whereas cash back and travel benefits generally depreciate due to inflation or devaluation. However, these earned rewards are not taxable, whereas acquiring cryptocurrency is treated as an asset, which becomes taxable if you decide to sell it. Therefore, if you aim to earn or sell a significant amount of cryptocurrency, consulting a tax expert may be advisable.
• Flexibility: Each crypto card offers a unique selection of cryptocurrencies for earning rewards. If you’re interested in specific coins, make sure to check if the card and its associated exchange support those investments.
• Benefits: Many crypto cards offer limited benefits, so if you’re a frequent traveler, a travel rewards card may provide greater advantages. Alternatively, if saving money on your purchases is your goal, a cash back credit card might suit your needs better.
• Limitations: Due to differing state regulations across the country, not all crypto cards are accessible to everyone. So, prior to applying, it’s wise to verify each card’s terms and conditions to confirm your state meets eligibility requirements. Additionally, if you manage your cryptocurrency accounts from outside the United States, it could lead to violations of international laws, making it advisable to handle your crypto rewards primarily within the U.S.

Crypto cards available currently
While some crypto cards are operating on a waitlist basis, if you’re excited to apply and start earning, the following cards are accepting applications.

Crypto debit cards
Crypto.com Visa Debit Card: You’ll receive rewards in CRO, the native cryptocurrency of Crypto.com.
Coinbase Debit Card: Rewards can be earned in eight different cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin.

Crypto credit cards

• Venmo Credit Card: You can automatically buy Bitcoin, Ethereum, Litecoin, or Bitcoin Cash using the cash back you earn from your purchases.
• Brex Business Card: You can use the rewards points you accumulate with the card to buy either Bitcoin or Ethereum.
• BlockFi Credit Card: Select from a variety of cryptocurrencies for rewards, including Bitcoin and Ethereum.

While the types of credit card rewards are limited, the inclusion of cryptocurrency has introduced a new option. This marks an exciting development in the credit card industry, but it’s crucial to ensure that crypto rewards align with your financial situation.

Moreover, it’s vital to spend wisely, even if the rewards have the potential to grow in value. Accumulating credit card debt is never advisable, and overspending can lead to significant interest costs.

Can You Purchase Crypto Using A Credit Card?

Whether you’re well-versed or just beginning in the world of bitcoin and other cryptocurrencies, you may want to consider using a credit card to purchase crypto. Buying cryptocurrency with a credit card is indeed possible, but it comes with distinct considerations and potential fees. This article will cover the benefits and drawbacks, as well as the risks and security measures associated with using consumer credit for crypto purchases. By the end, you’ll have the necessary knowledge to determine if and how to proceed with buying crypto using a credit card.

Common Payment Methods For Buying Crypto
There are various common payment methods available for purchasing crypto, including bank transfers, debit cards, PayPal, and credit cards. Before focusing on credit cards, let’s first explore a few other prevalent payment methods.

Bank Transfers (ACH transfers)
Bank transfers, or Automated Clearing House (ACH) transfers, are one of the most popular ways to buy cryptocurrency. They offer high transfer limits and lower fees, making them suitable for both small and large transactions. Most major exchanges support this payment option.

Some banks and exchanges offer instant bank transfer capabilities, while in other cases, completing the transfer may take several days. Despite potentially slower processing, the cost-effectiveness and convenience typically make bank transfers a favored choice among crypto purchasers.

Debit Cards
Using a debit card for cryptocurrency purchases provides speed and convenience, allowing for swift transactions with generally lower fees. Many exchanges accept debit cards, offering users a fast and familiar way to buy crypto.

Certain platforms might set transaction limits or require extra security checks, but debit card transactions are generally quite similar to bank transfers.

PayPal
Purchasing cryptocurrency through PayPal is a convenient route, particularly for those who already possess a PayPal account. Users can buy, sell, and hold Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and a unique stablecoin called PayPal USD, with a minimum investment of just $1. However, PayPal’s fees for cryptocurrency transactions are often higher compared to those on specialized exchanges.

In 2022, PayPal faced significant criticism for an update to its user agreement that introduced a clause allowing them to withdraw funds from a user’s account for posting perceived “misinformation” or “hate speech.” After receiving considerable backlash, PayPal retracted this policy. Nonetheless, given the variety of methods available to acquire crypto, there’s no need to utilize PayPal and risk having your assets confiscated due to your social media posts.

Can You Purchase Crypto With A Credit Card?

Certain exchanges permit the purchase of cryptocurrency using a credit card, adhering to specific limits, location requirements, and the policies of credit card providers. While using a credit card can offer convenience, it often entails higher transaction fees and may also incur cash advance charges. Some credit card companies have restrictions on using their cards for cryptocurrency purchases, leading to potential declines if attempted.

How To Buy Crypto With A Credit Card

If you want to buy crypto via credit card, follow these step-by-step instructions.

1. Select A Crypto Exchange
Begin by choosing an exchange that facilitates credit card transactions. Conduct research to find one that provides security, low fees, and the cryptocurrencies you want to buy. Some exchanges only support bitcoin, while others allow the purchase of various altcoins and crypto tokens.

2. Register And Confirm Your Identity
Most exchanges will ask for identity verification to comply with governmental regulations. This process generally involves providing a government-issued form of ID and may only take a few minutes to complete.

3. Associate Your Credit Card
After verification, go to the section for payment methods and input your credit card details. It’s generally advisable to inform your credit card issuer about your intention to purchase cryptocurrency using your card. Failing to do so may lead to a high likelihood of your transaction being automatically rejected.

4. Purchase The Cryptocurrency You Prefer
Select the cryptocurrency you wish to acquire, specify the amount, and confirm the transaction. Some platforms send the cryptocurrency directly to an on-chain address, while others keep it in custody until you decide to withdraw it.

Which Exchanges Permit Credit Card Transactions?

As of October 2024, the following cryptocurrency exchanges allow you to acquire crypto using a credit card:

• Coinbits is an exchange focused solely on bitcoin, enabling users to buy bitcoin with a credit card right on its public website without needing an account. To boost the chances of your transaction being approved, it’s advisable to notify your credit card company if you plan to use your card for cryptocurrency purchases.
• CEX.IO is a reputable cryptocurrency exchange and trading platform in operation since 2013. After creating an account, you can purchase cryptocurrencies using a credit card along with other payment options.
• Kraken allows you to buy crypto using a debit or credit card if you have verified Intermediate and Pro level accounts in eligible countries. Your card must support 3D Secure (3DS), providing extra fraud protection.

Advantages And Disadvantages Of Using A Credit Card To Purchase Crypto

There are several pros and cons to consider when buying crypto with a credit card.

Pros

• Speed and ease: Credit card transactions are quick and straightforward.
• Instant access to funds: Your cryptocurrency becomes available almost immediately, without the waiting period associated with bank transfers.

Cons

• Increased fees: Credit card purchases often incur additional fees, which means you may receive less cryptocurrency for your investment.
• Interest and debt liability: Unpaid balances on credit cards can accumulate interest, potentially raising the overall expense of your investment.
• Restrictions from credit card companies: Certain providers may block or restrict cryptocurrency purchases, limiting your choices.

Do Credit Cards Provide Crypto Rewards?

Some credit cards offer cryptocurrency rewards, enabling users to earn bitcoin and other cryptocurrencies instead of conventional points or cash back. These cards present a novel way to earn crypto passively through everyday spending. Although these card programs were gaining traction a few years back, regulatory measures against the crypto sector by the U.S. government in 2022 prompted many to close.

A few credit cards still provide options for earning cryptocurrency rewards. A prominent example is the Gemini Credit Card, which offers immediate crypto rewards with no transaction fees. Cardholders can earn 3% back on dining, 2% on groceries, and 1% on various other purchases, redeemable in bitcoin, ether, or other cryptocurrencies. Unlike many other cards, Gemini’s rewards are available right away, giving users access to crypto with every transaction.

The Venmo Credit Card also offers a method to earn crypto rewards. Cardholders receive 3% back on their top spending category, 2% on their second-highest category, and 1% on all other purchases. While these rewards are issued as cash back by default, users have the option to convert them into crypto at no extra charge, allowing flexibility for those interested in building a cryptocurrency portfolio.

Fees That May Apply
When using a credit card to acquire cryptocurrency, fees can accumulate rapidly and may differ based on the exchange, credit card issuer, and type of transaction. Here are the primary fees to be aware of:

Transaction Fees
Most exchanges impose a fee for credit card transactions, typically ranging from 2-3%, which can be considerably higher than other methods such as bank transfers. For example, a $1,000 cryptocurrency purchase could incur an additional charge of $20 to $30 in transaction fees.

Cash Advance Fees
Certain issuers may classify cryptocurrency purchases as cash advances, which incur a charge of 3-5% and start accruing interest immediately. For instance, American Express might treat a $1,000 cryptocurrency purchase as a cash advance, leading to an additional $100 in fees. Be aware that cash advances also eliminate the usual grace period for repayment.

Foreign Transaction Fees
If the exchange is based outside of your card’s issuing country, anticipate a 3% foreign transaction fee.

Risks Associated With Credit Card Purchases
Using a credit card to buy cryptocurrency can involve risks, and it’s essential to be aware of possible pitfalls before proceeding. Here are some important risks to consider:

Credit Card Security Risks

Although numerous reputable exchanges emphasize security, the cryptocurrency market comprises many platforms that differ greatly in authenticity. Some may be susceptible to hacking incidents, while others could, in extreme situations, be outright fraudulent. While credit cards provide fraud protection, compromised data can result in unauthorized transactions and lengthy disputes. Always opt for reliable, highly-rated exchanges and steer clear of platforms that promise fast profits.

Impact On Credit Score And Debt

Purchasing with credit cards increases your overall debt, which may elevate your credit utilization ratio and potentially negatively impact your credit score. The accumulation of high-interest debt due to cryptocurrency purchases can swiftly escalate if market values change, leaving investors in a precarious financial situation. Only invest amounts that you can comfortably repay and consider beginning with small, manageable transactions to reduce financial pressure.

Security Measures To Consider

Investigate the exchange’s reputation for data security before connecting your card. Look for exchanges that provide two-factor authentication (2FA) and refrain from using public Wi-Fi while making transactions.

Is It Worth Buying Crypto With A Credit Card?

Determining whether it’s beneficial to buy cryptocurrency with a credit card hinges on your financial objectives and willingness to accept risks. Weigh the fees, potential for incurring debt, and your credit card’s stance on cryptocurrency transactions. If quick access to funds and convenience matter to you, and you’re prepared to incur additional fees, using a credit card for crypto purchases may be a viable consideration.

In specific situations, purchases of cryptocurrencies could earn reward points, helping to offset some or all of the related fees. This aspect can make using a credit card for cryptocurrencies a more economical choice, especially if you’re accumulating rewards on purchases you would have made regardless.

Alternatives To Credit Cards For Crypto Purchases
For individuals wishing to avoid credit card charges, other options include bank transfers (ACH), wire transfers, and even cash methods such as physical currency and money orders.

Bank Transfers (ACH Transfers)
Bank transfers, or ACH (Automated Clearing House) transfers, present a commonly utilized and economical means to acquire cryptocurrency without incurring steep credit card fees. Many exchanges facilitate bank transfers with little to no transaction costs, although processing may take a few days. This approach is suitable for those who are comfortable waiting briefly to evade the extra expenses linked with immediate transactions.

Wire Transfers
Wire transfers serve as another alternative for purchasing crypto and are particularly beneficial for larger transactions. Although wire transfers usually involve a fee (generally between $10-$30 domestically, and a bit more internationally), they are quicker than ACH transfers, often concluding within the same day. This option strikes a balance between speed and cost-effectiveness, making it a favored choice for investors handling larger amounts.

Cash Instruments
For those desiring maximum privacy and aiming to avoid charges, cash instruments like physical currency and money orders can also be utilized, mainly through peer-to-peer platforms. Cash transactions may be subject to limitations regarding amounts and availability but provide a straightforward, no-fee alternative to credit-based purchases.

Bottom line

Buying cryptocurrency with a credit card is convenient but carries associated costs and risks. While credit cards offer speed and flexibility, they frequently involve elevated fees, possible cash advance charges, and an increased risk of debt. Options like bank transfers, wire transfers, and cash provide more economical ways to enter the crypto market for those willing to plan in advance. Ultimately, the decision to use a credit card hinges on your financial goals, risk appetite, and preference for convenience over cost. Always assess fees, security measures, and payment flexibility to identify the best choice for your crypto objectives.