Can you buy cryptocurrency with a credit card?

Buying cryptocurrency isn’t usually as simple as whipping out your credit card. In fact, many credit card issuers don’t even allow their cards to be used to purchase cryptocurrency.

To avoid unnecessary fees, you need to know how your card issuer handles crypto transactions. Here are a few tips.

How buying cryptocurrencies with a credit card works

Credit cards offer benefits such as convenience, generous rewards programs and buyer protection, but these aren’t as relevant for crypto transactions.

Some major issuers do not allow their credit cards to be used to buy cryptocurrency, and among those that do, crypto transactions are typically treated as cash advances, which involve fees and high interest rates. Cash advances don’t earn rewards, either.

Plus, cryptocurrency exchanges often tack on their own credit card processing fees, separate from card issuers’ cash advance fees.

Pros and cons of buying crypto with your credit card

Pros

• Quick and convenient: When you buy crypto with your credit card, it will be available to trade almost instantly, allowing you to take advantage of opportunities on short notice.
• Digital payment method: Unless you have access to a crypto ATM, you’ll have trouble buying crypto with cash. But you should be able to use many credit cards.

Cons

• Market volatility: The crypto market is notoriously volatile, and by borrowing money to purchase crypto, you could end up owing more in interest than you gain from your investment.
• Processing fees: Buying crypto with a credit card comes with many processing fees, which may cost more than you end up gaining from your crypto investment or earning via credit card rewards.

What to consider when buying crypto with a credit card

When deciding whether buying crypto with a credit card is worth it, the first thing you need to consider is the extra cost. You’ll not only face commission fees from the crypto exchange just for trading on the platform, but also additional fees for using a credit card.

As Coinbase, a popular crypto exchange platform, puts it, “When you buy, sell, or convert cryptocurrencies on Coinbase, fees are charged. These fees are calculated at the time you place your order and can be influenced by factors such as your chosen payment method, order size, market conditions, jurisdictional location, and other costs we incur to facilitate your transaction.”

Commission fees are the hardest crypto transaction fee to avoid, and you’ll pay them regardless of your payment method. But using a credit card to buy crypto could subject you to two additional fees:

• Credit card processing fees (typically 2 to 3 percent)
• Credit card cash advance fees (typically 3 to 5 percent)

You’ll likely pay at least 5 percent in fees in addition to commission fees, which would certainly offset any rewards you might earn from the purchase. Funding your crypto purchases by transferring funds directly from your checking account is likely to be a much cheaper alternative.

Credit card processing fees for crypto purchases

Binance, one of the most popular cryptocurrency exchanges, accepts Visa and Mastercard credit cards when permitted by the issuer. It charges a fee “up to around 2 percent,” which it touts as one of the lowest credit card acceptance fees in the industry.

That can still add up in a hurry, however, and the fee applies to debit card transactions as well. Coin mama, a competitor, charges around 3 percent for credit and debit card transactions.

Credit card cash advance fees

When credit card transactions are permitted for crypto purchases, cash advance fees — commonly 3 to 5 percent of the transaction amount — typically apply. That’s true for other cash and cash-like transactions, such as ATM withdrawals and casino chips, too.

Worse, a high cash advance APR (often around 30 percent) starts accruing immediately. When you pay your credit card bills in full, you almost always get a grace period on interest charges (typically 21 days or more) between when the statement arrives and when interest starts to accrue. But that grace period doesn’t usually apply to cash advances.

Which cards let you redeem rewards for crypto?

Crypto credit cards have had a pretty rocky journey over the last few years, but some issuers and crypto platforms are working to develop cards that are versatile and rewarding.

Although legacy credit cards, like those offered by your typical issuers, might not be great for crypto transactions, crypto platforms like Gemini offer cards that are closely integrated with cryptocurrencies. They’re easily the best cards for crypto investments.

The Gemini Credit Card®

The Gemini Credit Card gives cardholders instant crypto rewards without any transaction fees. Cardholders don’t even need to wait for the end of the billing cycle to receive these rewards.

The card offers 4 percent crypto back on gas and EV charging, 3 percent back on dining, 2 percent back on groceries and 1 percent back on everything else. You can even set your rewards to redeem automatically with over 50 crypto options available through Gemini. These include Bitcoin, Ether or other popular cryptocurrencies.

The Venmo Credit Card

The Venmo Credit Card* is another possibility. It has a user-friendly structure that doles out 3 percent back on users’ top eligible spending category each monthly billing cycle, 2 percent back on their second-largest eligible spending category and 1 percent back on everything else.

This is primarily a cash back card, but cardholders can elect to have their cash back converted into crypto without the usual transaction fees.

Is it worth buying crypto with a credit card?

Since you’ll likely pay at least 5 percent in processing and cash advance fees for using a credit card to buy crypto (in addition to commission fees), it’s likely not worth it unless a credit card is the only payment method you have. These fees will also almost certainly offset any rewards you might earn from the purchase.

If you think your investment will provide you with a sizable return and your window of opportunity is small, it could be worth paying the extra fees, but funding your crypto purchases via your checking account is likely the better option in most cases.

Investing credit card rewards

If you’re thinking of getting into the crypto market, converting credit card rewards into crypto is an easy, inexpensive way to dabble. It’s more streamlined and fee-friendly than putting your own funds into crypto.

The Gemini card is a great starter option since it carries no annual fee and earns your crypto of choice automatically as you make purchases.

But crypto isn’t your only option for investing credit card rewards. For example, the FidelityⓇ Rewards Visa Signature Credit Card* is a 2 percent cash back card which deposits rewards into an eligible Fidelity account. You can then use your rewards to purchase stocks, bonds and other investment products. The Fidelity card doesn’t allow direct rewards-to-crypto transfers, but it’s possible to create a link between a Fidelity brokerage account and a Fidelity Crypto account.

The bottom line

Cryptocurrencies haven’t become mainstream payment instruments yet, but they remain a popular (albeit highly risky and volatile) asset class.

Investing in crypto isn’t for the faint of heart, and even if you’re ready to take the plunge, make sure not to risk more than you can afford to lose.

Since using a credit card to buy crypto often comes with additional fees and penalties, funding your crypto investments with a linked bank account is likely a better choice — especially if you’re new to crypto. That said, you can also consider redeeming credit card rewards for crypto as a lower-stakes strategy.

* Information about the Gemini Credit Card®, Venmo Credit Card®and FidelityⓇ Rewards Visa Signature Credit Card has been collected independently by Bankrate. Card details have not been reviewed or approved by the issuer.