There are few things which you should first consider before you decide to buy bitcoin on credit cards.
- Impact on your credit score
Whenever you think of buying bitcoin on a credit card, always first calculate how much available credit you will be using. Percentage of your credit limits becomes the major factor of your credit score. This is called utilization. Generally, the more of your available credit you use, the lower will be your credit score. If you decide to use your full or most of the credit in buying bitcoin, your credit score will automatically go down. Credit score can be recovered once you do the payment of your credit card, utilization doesn’t have a history in major credit scoring model. A good credit score can benefit you in getting loan approved. If you want to maximize your credit score avoid major expenditure.
Transaction fees: whenever you do a payment using a credit card, there is someone who is paying credit card processing fees to the credit card user and network to process the transaction. Generally the fees is around 2-3%. For example, when you buy something in store, the retailer includes the transaction fees into the price you pay. As you don’t see the credit card processing cost as a separate line item. Similarly, when you buy bitcoin or currency, it’s common for the issuer/broker to tell you separately about the fee. Buying bitcoin on a credit card would cost you around 3% processing fees. This fees can be avoided if you do a bank transfer.
Foreign transaction fees: if you use a credit card issued by one country to buy bitcoin on an exchange that is not of the same country, then you might be charged a foreign transaction fees by your credit card issuer. It all depends on the card you have. This can be avoided if you don’t use the credit card with foreign transaction fees. Bring your views towards the site to know more about the fees.
- Cash advance fees
Earlier, most exchange treated buying bitcoin as a normal exchange, which meant that they all came under the credit card’s grace period and purchase APR. Now Visa and Mastercard has started classifying cryptocurrency as purchase cash advances, which means higher fees the interest starts accruing immediately. If you want to avoid this and be safe, research the exchange you plan on using, find other people who have been using credit cards on that exchange.
When you buy bitcoin on a credit card, simply to get reward and afterwards when you pay off the card with the money you have, can make you lose money on the value of your bitcoin. But will help you to come over debt. Cryptocurrencies are highly volatile. If the price drops then there are chances that you find yourself in deep credit card debt.