Image Source: https://www.pexels.com/photo/gold-bitcoin-844127/

Buying Crypto with A Credit Card Can Cost You an Extra 7% Or More

Cryptocurrency has become the focal point for most investors and online traders, judging from the increasing value of existing and newly launched ones. Financial experts recommend traders to consider acquiring some crypto as a long-term investment. This has attracted several finance enthusiasts who wish to make future profits.

There are various ways of investing in crypto. For example, with Bitcoin, some people opt to trade it while others use it to fund their gambling accounts. South African players, for instance, prefer using bitcoin casinos they can take advantage of the bonuses available, including sign-up offers and free spins. These platforms allow you to play a wide range of casino games with the Bitcoin stored in your wallet, and you can easily convert to South African Rands at relatively lower processing fees.

Unfortunately, when buying bitcoin using your credit card on exchanges such as Bitstamp will have you part with a significant amount of your money in ‘additional fees’. You stand to incur about 7% or more in fees.  Compared to other payment options, this fee is extremely high whereby you are charged an issuer fee and an exchange fee.

A 2% Fee (or More) Goes to the Exchange

When it comes to stocks, you can only buy digital currencies using a crypto exchange. Issuers of credit cards always apply a processing fee for each transaction made on the credit card, including crypto transactions. The charges vary significantly, depending on the type of card and the issuing entity. However, an estimated 2% on the transaction amount is the standard figure charged by the exchanges.

In some instances, you may come across exchanges that demand far more than the processing fee. When this happens, you could incur a fee as high as 3% of the transaction amount. Since many issuers are against crypto purchases using their credit cards, you will be lucky to find an exchange that accepts credit cards.

At Least 5% Goes to the Credit Card Issuer

Many card issuers handle crypto purchases the same as cash transactions; that is why they charge a comparatively higher fee than what exchanges charge. The issuer assumes that a crypto purchase is similar to an ATM transaction where you can use your card for a cash advance. When you request a cash advance transaction, you incur a fee ranging between 3% and 5%. A specific illustration involves a trader who buys cryptocurrencies worth $100 using a card. When the cash advance fee is applied, you will have to incur an extra $5 charge.

Unfortunately, customers do not have the option of a grace period since the interest starts accruing as soon as the money is credited. Another reason why the fees will keep adding up so fast is that cash advances come with higher interest rates than typical purchases.

Better Ways to Buy Crypto

There are numerous payment options to buy crypto, not just with credit cards. Many crypto exchanges favor debit cards, and you are in a better position if your debit card earns some points so that you can get cashback. ACH transfer is another prevalent method to purchase crypto. It is also widely accepted by various financial institutions. It simply entails the transfer of money from a bank account directly to an exchange account. With ACH transfers, the charges are significantly lower.

SEPA (Single Euro Payment Area) is another cheap and fast payment method for individuals in the UK. This option allows you to transact Euros between EU residents’ bank accounts. The best thing about using SEPA is that most exchanges will charge little to no fees, and you also get a relatively higher buying limit since they are not worried about chargebacks.

*This is a collaborative post.