14 Apr 3 tips for buying Bitcoin with credit cards
A surprise class-action lawsuit hit JPMorgan Chase this week and highlighted the perils of purchasing cryptocurrency with a credit card.
The lawsuit claims JPMorgan assessed extra fees without notice and “stuck the plaintiff with the bill, after the fact of his transactions, and insisted that he pay it.”
It raises important questions for investors and consumers about buying cryptocurrency with credit cards and we’ve got some tips to help you avoid exorbitant fees and other hidden charges.
How are banks handling cryptocurrency credit card purchases?
The list of banks banning buying of bitcoin on credit cards is growing internationally. Why? In the volatile world of virtual currencies, banks are simply concerned about the risk of lending to consumers for crypto purchases on credit cards.
If the market and value of cryptocurrencies plummet, consumers may be unable to pay back their credit card purchase when their anticipated new virtual coin fortunes disappear.
Should you ever buy crypto with your credit card?
The investment world is filled with losers who thought they had a sure thing, despite the apocryphal stories of stock market and bitcoin billionaires.
Is it ever a good idea to buy cryptocurrency with a credit card? ValuePenguin offers valuable advice to consumers on this topic. According to their guide to Buying Bitcoin with Credit Cards:
“It’s not a good idea to purchase Bitcoin or other cryptocurrency with a credit card. This is because of the increased processing fees, cash advance fees and interest charges that will most likely exceed any reward value that a credit card can offer. These currencies have proven to be volatile, making them a risky investment. A good rule of thumb is not to invest more than you’re willing to lose.”
Three tips on buying cryptocurrency with credit cards
Robert Harrow, ValuePenguin’s head of Credit Card research, says while more and more banks are preventing consumers from purchasing crypto, some still allow it. Here are three tips he offers to help you be smarter and avoid hidden credit card fees if you can afford the risk of investing in cryptocurrency.
First, some banks still do let you buy bitcoin with your credit card.
“Consumers with credit cards from AMEX, USAA, Wells Fargo, US Bank and Credit One can still purchase bitcoin with their cards (for now). These purchases can be flagged as ‘fraudulent’ so call up your issuer and give them a heads up that you are about to make the purchase,” Harrow says.
Currently, some of the banks that allow cryptocurrency credit card purchases include American Express, Credit One, US Bank, USAA and Wells Fargo.
Banks that have banned bitcoin purchases by credit card include Bank of America, Chase, Citibank, Discover, Capital One and Barclaycard.
Be ready for high fees
Second, he says be prepared for high fees. Wells Fargo and US Bank treat crypto purchases as a ‘cash advance’. That means users will be charged high fees and a much higher interest rate. This information isn’t obvious and is what sparked the Chase lawsuit.
Some cryptocurrency exchanges have added credit card processing fees as well as fees on deposits and withdrawals. Fees can range from 3.5% to 5.5% cryptocurrency exchange fees plus 3.5% to 5.0% credit card fees in addition. then there are possible hidden charges in addition. Ouch!
These fees can quickly add up and wipe out some more of your investment gains, so know what cryptocurrency exchange and credit card fees apply.
Ask about fees before buying
Third, Harrow suggests calling your credit card company in advance before you do anything.
“If you want to be sure whether your credit card issuer will charge you any hidden fees for cryptocurrency purchase, it is best to call up customer support and ask about how your transaction will be handled. Unfortunately, we found that some customer service representatives were not trained to answer questions about crypto purchases and couldn’t provide us with a clear answer,” he adds
Harrow says you may have to persist to get the answers you need about fees on cryptocurrency credit card purchases.
Remember, it’s a jungle out there when it comes to cryptocurrency investments and using credit cards for coins simply adds more cost and risk to the equation. We don’t recommend you do it but at least know what you’re getting into.
You can get much more detail in ValuePenguin’s very useful guide Buying Bitcoin With Credit Cards: How Does it Work and Should You Do it?.
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Editor’s note: Information on Blockcoin Today is not intended as investment advice. Please consult your own investment advisors for appropriate guidance and counsel.
Author: Jeff Domansky, Managing Editor