People are able to use their credit cards to buy a wide variety of things because they are accepted in almost every store and are useful to buy online too. But there are some things that people may not be able to purchase with credit cards; one of those things is cryptocurrencies.
There is still some noise about the purchase of cryptocurrencies should be bought with credit cards and if banks should allow it. In this article we are going to talk about the use of credit cards to buy cryptocurrencies. But first, let`s see what are cryptocurrencies because the concept may not be clear for some people.
Credit cards and cryptocurrencies
A cryptocurrency is a digital asset that can be used as a medium of exchange and it has a strong security protocol that makes it almost inviolable. Cryptocurrencies are popular nowadays thanks to the bitcoin boom which took the value of that cryptocurrency to almost 20.000$. They can be used as a reserve of value but cryptocurrencies are known for the instability in their prices so they are a good option to speculate over the price of it and look for a return.
Cryptocurrencies are decentralized and the value is represented in the trust of their investors. So, countries are not able to offer “real” cryptocurrencies because they can`t be centralized. Other important aspect about cryptocurrencies is that they have a legal document called “white paper” and it talks about the purpose of the cryptocurrency and the project behind it.
Investing is frequently associated with risk and investing in cryptocurrencies is a high-risk investment because the prices of cryptocurrencies are volatiles. So, that invest with such a risk should be considered as dangerous and some financial institutions and financial advisers look carefully and think twice before investing in that market. However, the profits can be high which makes it a great opportunity. Now, let`s talk about the use of credit cards to buy cryptocurrencies.
The use of credit cards to buy cryptocurrencies
When the prices of cryptocurrencies start to go up people thought that buy cryptocurrencies with credit cards could be a great idea because the prices were getting higher and higher with the past of time. The idea was to buy cryptocurrencies and pay the debt later by selling less cryptocurrencies that they bought because with a higher price on the cryptocurrency they will be able to get the same amount of dollars with less cryptocurrencies. The profit from that transaction will be the cryptocurrencies that the person has after paying the debt.
However, there is a risk associated with that because if the price of the cryptocurrency falls or don`t increase enough to pay the balance then the person may not be able to pay the debt. That is the reason why banks and financial institutions see the use of credit cards to buy cryptocurrencies as a risk. However, it can be possible in some case but keep in mind that there may be some troubles to do it.
Some of the troubles that you may face when using a credit card to buy cryptocurrencies are: the cost of transaction because the exchange may charge an extra fee for the use of credit card; a limit in the amount of cryptocurrencies that you can buy with credit cards not only because of the credit limit in the credit card but for a limit that the exchange stablish; the credit card provider may see it as a cash advance because they may say that you are not buying cryptocurrencies directly but asking for cash to buy them, in that case the credit card provider may charge an extra fee for the cash advance.
Other trouble is the risk of giving your credit card information to the exchange especially if it not a trust exchange. They may use you information to use your credit card without your authorization or make extra charges and you may don`t notice it until you check your balance. That is why is recommended to use the credit card in places that are secure. Now, let`s see the restrictions and regulations to buy cryptocurrencies with the credit card
Restrictions and regulations to use the credit card to buy crypto
Some credit card providers have blocked the purchase of cryptocurrencies with their credit cards due to the high risk of it; some of them are Bank of America, Citigroup, Capital One, Discover and JP Morgan Chase. And those are the most important credit card providers in the US which limit the opportunity for people to buy cryptocurrencies with credit cards but lowers the risks associated with that activity.
But if you have a credit card from other financial institution and you want to use it to buy cryptocurrencies then you may face other restriction which is the limit of money that you can use in the exchange to buy crypto with a credit card. For example, some exchanges have a restriction for that and people are able to buy $150 on cryptocurrencies per week when using credit or debit cards of the US. And they also charge an extra charge for the use of credit card because that may represent an extra cost for them.
In summary, it is possible to use a credit card to buy cryptocurrencies but it is restricted because of the risk associated with it. Financial institutions are looking to make it almost impossible to the customer to use the credit card for that purpose or to delete the incentive to do it by increase the costs of doing it. If you want to know more about it feel free to make some research about it and there is plenty of information out there about this subject.