Buying Cryptocurrency with credit card Guide, Digital currencies tips, Online crypto advice
Buying Cryptocurrency With Credit Card
21 May 2021
Trying pretty hard to purchase some Crypto? Or perhaps stuck on how to go about using your credit cards on an exchange platform in purchasing and securing your crypto? This article would help you out, whether a noob or a pro. Dive in!
In an era where the demand and drive to own digital currencies keep rising, and even increase the urge of keeping one’s assets in form of digital currency has become an even safer and lucrative option, hence the need to purchase these currencies is in higher demand. Could sometimes prove problematic, especially for noobs and sometimes for even pros as it sometimes turns to be quite complex and not completely easy to understand.
Explained details in this article, would help even a noob understand perfectly how to go about it efficiently. While there are a lot of ways to buy cryptocurrency, there are also certain rules and knowledge to know before jumping on the train.
Buying Cryptocurrency With Credit Card Advice
A couple of terms to get familiar with before we delve further into buying cryptocurrency with credit card-;
An app that allows crypto owners to store and safeguard their digital currencies. Easily described as a digital wallet. When a user acquires a cryptocurrency maybe bitcoins, ethereum, or any altcoin, he/she stores it in a wallet and can make any transactions from there be it trading or withdrawal activities. These wallets are kept safe by private keys given at the registration, advised to be kept private and personal
Where people can buy and sell cryptocurrency, these would be properly explained as we go further
One of the most used cryptocurrency terms, blockchain is the underlying technology of cryptocurrency that keeps the system secure.
- Peer to peer
P2P, as it is often seen, is an exchange that allows users to purchase or sell cryptocurrency between themselves, while also ensuring the safety of these transactions and curbing fraudulent approaches. The most exchange involves this mode of transactions as it is also swift and easy.
In purchasing crypto, A lot of newbies find it to be a herculean task to carry out. With these few steps buying with a credit card would be simplified properly.
Step One: Create a wallet address
Cryptocurrency wallets are a place to store cryptocurrency more securely. Having your crypto outside of the exchange and in your wallet makes it personal and he/she having personal control over the private key to your coins/cryptocurrency. It provides the option of storing funds away from your exchange and avoids the risk of your exchange being compromised and losing its funds.
While most exchanges offer wallets for their users, they are not always concerned about how much security they’d offer. It’s never advisable or recommended to use an exchange wallet for large or long-term cryptocurrency storage.
Some wallets have more features than others. Some are Bitcoin only and some offer the ability to store numerous types of altcoins and even shitcoin. Some wallets also offer the option to swap one token for another.
When it comes to choosing a Cryptocurrency, there are a lot of options to consider. The first thing that you will need to understand about crypto wallets is the concept of hot wallets (online wallets) and cold wallets (paper or hardware wallets).
Online wallets are also known as “hot” wallets. Hot wallets are wallets that carry out operations on internet-connected devices like computers, mobile phones, or tablets. This is not safe as there is room for compromising data or manipulating it. While a hot wallet is the most convenient in making and accessing transactions with your assets quickly, storing your private key on an internet-connected device makes it more susceptible to a hack.
These wallets are known best to be used for small amounts of cryptocurrency or crypto wallets.
Exchange wallets are accounts provided by the exchange. The user is not the holder of the private key to the cryptocurrency that is held in this wallet. If an event happens where the exchange is hacked or their account becomes compromised, your funds would be gone.
The description of a cold wallet is really easy, it is a wallet that is not connected to the internet and doesn’t carry out its operation on the internet. Makes it stand at a far lesser risk of being compromised. These wallets can also be referred to as offline wallets or hardware wallets.
These wallets store a user’s private key on something that is not connected to the internet and can come with software that works in parallel so that the user can view their portfolio without putting their private key at risk.
One of the most secure and advised ways of storing cryptocurrency is via a paper wallet. A paper wallet is a wallet that you can generate off of certain websites.
A more commonly used type of cold wallet is a hardware wallet. A hardware wallet is typically a USB drive device that stores your private keys safely offline. Such wallets are more preferred over conventional hot wallets, they have a lower risk of getting compromised as they are offline.
Cold wallets are the most secure way to store your Bitcoin or other cryptocurrencies. The only difficulties that could be experienced are in the knowledge required to set up.
A good way to set up your wallets is to have three things: an exchange account to buy and sell, a hot wallet to hold small to medium amounts of crypto you wish
Step Two: Choose and Register with an Exchange:
Signing up for a cryptocurrency exchange will allow you to buy, sell, and keep cryptocurrencies. It is of best practice to make use of an exchange that permits its users to also withdraw their cryptocurrency to their wallet for safekeeping.
There are many types of cryptocurrency exchanges. Most cryptocurrency exchanges are about decentralization and individual sovereignty, some exchanges allow users to remain anonymous and do not require users to enter personal information. Such exchanges operate autonomously and, typically, are decentralized which means they do not have a central point of control.
Such systems sometimes can be used for illicit and fraudulent activities, they also have the pros, in that it provides services for the world’s unbanked population. For a certain class of people – the average class citizens or those living in countries with little to no infrastructure for government credit– anonymous exchanges can help to bring them into the mainstream economy.
There are two kinds of exchange to register with
- Centralized Exchange
The first and most common type of exchange is the Centralized Exchange. Popular exchanges that fall into this category are Coinbase, Binance, and Gemini. These are companies that offer platforms or mediums to trade or store cryptocurrency. Centralized exchanges require registration and identification, also known as the Know Your Customer, or Know your client, rule. Koinal can exist as both decentralized and centralized, it also respects the KYC rule, as an attempt to curb generally criminal activities
These exchanges listed above possess high trading activities and volumes.
The larger and more popular exchanges are the easiest for new users and also provide a level of insurance, should their system fail. Any crypto purchased is stored within their custodial wallets
The insurance provided is only applicable if the exchange is at fault. Should your computer or your Binance account, for example, become compromised, your funds would be gone, and you would not likely have the ability to claim insurance.
- Decentralized Exchange
A decentralized exchange has no central point of control. Imagine it as a server, except that each computer within the server is spread out across the world and each computer that makes up one part of that server is controlled by an individual. If one of these computers turns off, it has no effect on the network as a whole because there are plenty of other computers that will continue running the network.
This is much different from a company controlling and overseeing in a single location, it is much more difficult to attack something that has no central point or better still is spread out(decentralized), making threats to shut down or attack it unrealistic and unsuccessful.
Due to decentralization, these exchanges are not subject to any regulatory body, laws, and rules cannot be imposed as no person or group is running the system. It’s like an open market where participants or users come and goes.
Due to this decentralization, these types of exchanges cannot be subject to the rules of any regulatory body, as no specific person or group is running the system. The individuals who participate come and go, so there is no one individual or group that a government or regulatory body can realistically pursue. This means that those trading on the platform do not have to declare their identity
At the moment there a couple of exchanges that are not decentralized and do not need a KYC(Know Your Customer), some of the most popular exchanges not decentralized and do require KYC especially in the U.S, these exchanges include Coinbase, Kraken, Gemini, and Binance U.S., to name a few. Each of these exchanges has increased significantly in the number of features they offer to customers.
Coinbase, Kraken, and Gemini offer Bitcoin and a growing number of altcoins. These three are probably the easiest on-ramp to crypto in the entire industry. While Binance offers more to advanced traders, providing more enhanced trading functionality and a good range of altcoins to choose from.
Another key point to note when creating a cryptocurrency exchange account is ensuring the use of safe internet practices. This includes using two-factor authentication and using a password that is unique and strong, usually, it is important to align the password with the instructions that are provided, some instructions such as including a variety of lowercase letters, capitalized letters, special characters, and numbers.
In recent times, some of the best crypto exchanges you can ply your trade safely with are Coinbase, Binance (Best for Altcoins), Bisq (Best Decentralized exchange), and Koinal with an easy-to-understand interface
Coinbase remains the most widely used crypto exchange and dominates more in the US. It comes with a solid variety of altcoin options, has a friendly and not too complex interface. Most exchanges largely do their best in avoiding controversies, and ensuring they remain trusted.
Binance is also a great and reliable exchange, charges low on transactional fees, and also a wide range of cryptocurrencies to purchase. It supports the use of credit cards in purchasing crypto, supporting roughly 19 different FIAT currencies.
Step two: Connect your exchange to a payment method (credit card)
After choosing an exchange, you are now required to gather personal documents, depending on the exchange, the documents required could vary. The information could also depend on the region, the process is likened to the same when setting a brokerage account. After the customer’s identity has been confirmed and has ensured his identity or legitimacy you can further advance to set up your bank account directly but, in this context, connecting a credit/debit.
Worthy to note that exchanges charge fees on transactions, exchanges such as coin base charges 1.49% fee for bank accounts and 3.99% for credit cards. It is important to research the fees associated with each exchange to help you decide or choose an exchange that’d work for you. Credit cards also incur processing fees per transaction in addition to the normal transaction fee.
At Koinal we do not add any further fees after you confirm the order amount, any difference in amount observed may be due to the advance fee or exchange rate fee which we have no control over, the exchange fee is usually imposed by your card issuer when converting the amount to the base currency. At Koinal we support a wide range of FIAT currencies and credit cards, however except;
- Saudi Arabia
- North Korea
It predominantly operates with USD, however seeking to incorporate other currencies. Some of the countries listed above do not buy into the use of cryptocurrency and have active laws against the use.
Step Three: Make an Order
After linking up your credit card to your preferred exchange. The next step is quite easy to carry out, the customer is asked to enter in their details and a couple of information related to their credit card, alongside inputting the number of units of cryptocurrency they want to acquire.
Depending on the bank or financial institiuti0n whose credit card is being used, other confirmation processes are required, sometimes a confirmation code is sent to the customer to ascertain ownership, while these steps are carried out, sometimes the processes could take time to confirm depends on the exchange, we at Koinal make it as swift as possible, the range of 5-20 minutes. Visa or Master-cards, either of any is accepted. Koinal charges 2.5% per transaction.
A lot of exchange includes buy minimum and maximum values, the range differs as to how much you can purchase and the minimum unit that a customer can buy.
Buying Cryptocurrency With Credit Card advice
The cryptocurrency would reflect directly in their wallet.
If a customer is buying into another wallet, he must include the wallet address of the destination they are transferring to.
It is important to know the process to purchase Bitcoin with credit cards is similar to the one for buying the cryptocurrency with debit cards or through automated clearing house (ACH) transfers. The customer is required to enter his credit card details with the exchange or online trading setup and confirm the transaction. Purchasing Crypto with credit cards does come with its disadvantage. There are a couple of reasons for this.
First, not all exchanges allow Crypto purchases with credit cards due to generated processing fees and the risk of fraud. Their decision to do so usually works out in the best interests of customers. This is because credit card processing can generate additional charges onto such transactions. Thus, in addition to paying transaction fees, one will end up with processing fees that the exchange may pass onto you.
The second reason is that credit card purchases are relatively expensive. Credit card issuers usually that cryptocurrency purchases as cash advances and charge heavy fees on such advances. For example, American Express and Chase both count purchases of cryptocurrencies as cash advance transactions. So, if a customer purchases $100 worth of Cryptocurrency using an American Express card, he/she will pay $10 plus an annual percentage fee of 25%.
An indirect or alternative method of purchasing Cyptocurrency rather than using a credit card is to get a Crypto Rewards card. Such cards operate like the typical rewards credit card except they offer rewards in the form of cryptos. In other words, they invest the cashback earned from purchases into cryptos. A typical example of a crypto Rewards card is the BlockFi Bitcoin Rewards Credit Card3
However, note that the annual fee on these cards may be inconsistent and there may be additional costs associated with the conversion of fiat currencies into crypto.
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