The demand for cryptocurrencies has never been higher than it is right now. Cryptocurrencies gained widespread acceptability as a payment tool, and the arrival of institutional investors into the digital asset market boosted investor confidence in the long-term viability of cryptocurrencies.
While the inclusion of cryptocurrencies in investors’ portfolios is growing increasingly common, they continue to be a highly volatile investment class. Before investing their hard-earned money in a coin, an investor should consider the risk-reward ratio of the investment. When it comes to cryptocurrency, it is typically best to stick with well-known currencies that have a solid foundation, such as Ethereum, at least for beginners.
The second-place finisher is Ethereum, although Bitcoin is the market leader in terms of total market capitalization. Ethereum is supported by a large number of institutional investors as well as industry titans such as Mark Cuban. While both Bitcoin and Ethereum are digital currencies, they differ in a variety of ways. Even though this is debatable, experts think that ETH is fundamentally more powerful than Bitcoin.
With time, the acquisition of cryptocurrencies such as ETH and BTC has become quite simple. It is now possible for investors interested in purchasing Ethereum to do so using their credit cards. While this may appear to be beneficial at first glance, there are several factors that investors should keep in mind.
When applying for an Ethereum credit card, keep the following points in mind
Crypto exchanges were eager to give investors a variety of payment options to make cryptocurrency purchases more convenient. This is, without a question, a brilliant decision. There are some concerns that investors must consider, however, that may make these agreements less appealing to them.
When choosing an exchange, avoid skipping through the due diligence process
Hundreds of crypto exchanges have been established over the previous several years. 303 cryptocurrency exchanges with a large transaction volume will be listed on Coinmarketcap by August 2021, but they are not the only ones. Currently, some small exchanges provide excellent service to investors.
The legitimacy of some is unclear, though, and fraud is rampant in the cryptoverse. Investors must conduct due research before deciding to trade on the exchange. However, while the majority of exchanges make it simple to purchase Ethereum using a credit card, using an untrustworthy exchange puts the investor’s money in danger.
Apathy can be expensive, as many investors have discovered when they fell victim to a crypto fraud. Even in 2021, when a general understanding of suggested processes in Bitcoin transactions has become commonplace, fraud will continue to be committed.
Just a few months ago, the Turkish exchange Thodex was forced to close unexpectedly after being involved in a $2 billion fraud. Unfortunately, this figure is far smaller than the sums involved in previous, significantly larger frauds.
If an investor is forced to pick between two exchanges, one of which has been founded but is not permitted to accept credit card investments, and another which has not been formed but is permitted to accept credit card investments, it is always advisable to choose the former exchange.
It is preferable to pay by bank transfer or PayPal and to spend additional time transferring funds between accounts if necessary, rather than risk losing the entire amount of money.
Make use of a virtual private network (VPN).
The importance of cyber security for an online firm cannot be overstated. In addition to credit card transactions, cybersecurity is extremely important in many other areas. The encryption of every transaction, including mobile payments and online banking, is essential to prevent cyber thieves from gaining access to sensitive information.
A virtual private network (VPN) encrypts the data transmitted by a device across a network. When transactions are conducted via unmanaged networks, virtual private networks (VPNs) are an unavoidable cyber security solution.
Cybercriminals employ a variety of tactics to obtain user information, including mid-term assaults and SQL injections. Using a public network when making an exchange purchase for crypto, a cybercriminal may be able to get critical information that would allow him to move money from the user’s account to his account.
It is possible to avoid this problem with effective VPNs that use 256-bit AES encryption. While online transactions via a personal network are not recommended in most cases, a coin may provide an investor with a chance to purchase a stake at a favorable price in some cases.
Because crypto values seldom remain stable for more than a few minutes at a time, the investor would prefer to take advantage of the chance as soon as possible. If there is no other option than to use a public network, a virtual private network (VPN) can assist secure user information from hackers.
Fees for using a company credit card
The ease with which a credit card may be used might occasionally leave an investor with a significant role in his or her pocket. Certain credit card issuers impose surcharges on credit card transactions, particularly those involving crypto trades, to cover their costs.
The cash advance fee is the price that seems the most unreasonable of all of these fees. A cryptocurrency purchase made on a cryptocurrency exchange is seen by certain credit cards as a cash advance as if the cardholder had made a cash withdrawal from an ATM.
The difficulty with financial advances is that they typically come with a high-interest rate. The cash advance will be subject to a charge of 3 percent to 5 percent (or at least $10) of the amount advanced, depending on the quantity borrowed. As a result, if an investor acquires $1,000 worth of crypto using a credit card, he or she will be required to pay a cash advance of around $30–$50.
Unfortunately, the financial peril that crypto investors face may not be over yet for them. If the investor does not pay back the cash advance within a reasonable length of time, the credit card company will charge interest on the amount borrowed.
As anyone might have predicted, the interest rate is astronomically high, as is the case here. It is not unusual for a credit card issuer to levy a cash advance fee of up to 25% of the amount borrowed.
This is not an exhaustive list of the fees levied by credit card companies. If the investor or the seller is located in a different nation than the credit card company, the credit card company might calculate a foreign transaction fee (i.e. the exchange). Foreign transaction fees, on the other hand, may not apply to all credit cards, and investors should check with their credit card company to see whether they are being charged.
Another point to consider is the usage of incentives and bonuses. In addition, because cryptocurrency transactions are regarded as financial advances, they are ineligible for buy incentives and do not count toward meeting the costs required to qualify for the registration bonus.
Fees for currency exchange
Regardless of how difficult it may be for some to comprehend, there are a few additional fees that must be addressed when purchasing crypto using a credit card. This time, the exchange, rather than the credit card company, receives a portion of the proceeds.
Exchanges generate several different types of money. Their primary source of income is the cut they receive from every transaction, regardless of how the money is sent. Credit card consumers, on the other hand, are subjected to additional fees on top of the usual trading fees charged by the platform.
It differs from one transaction to the next in terms of the amount charged. Because of this, spend a few seconds reading the expenditures section of the transaction to understand how much the credit card payments will cost you in the future.
A commission, a credit card fee, and an exchange rate payment are all common fees charged by the exchange. In all, these expenses may amount to as much as 10 percent of total revenue (or more). Please keep in mind that these fees are in addition to the fees that the credit card company charges.
Investors who do not review the fee structure of the exchange may not be aware that additional costs are applied when paying with a credit card on the exchange’s website. Because the exchange includes the costs in the transaction price of the asset rather than expressly including them in the final payment amount of the investor, it is possible to avoid paying these fees.
In some instances, there is a significant danger
Everyone understands and accepts the volatility of cryptocurrencies nowadays. As a result, investors should only put money into their portfolios that they can afford to lose. This is where the use of credit cards becomes a concern. Investors can be persuaded to acquire a significant amount of stock in the expectation that prices would rise in their favor, even if they do not have the necessary cash to make the acquisition.
The fact that this investment was made would have been considered a mistake by any sensible investor. New investors, on the other hand, are sometimes lured in by the prospect of making quick money. The first issue is that the whole amount paid to the credit card will instantly result in a cash advance charge being applied to it.
Furthermore, if the price does not move in the investor’s favor, it may be emotionally difficult for the investor to bear. Consider the situation of being financially strapped and fearful about incurring a few thousand dollars in more credit card debt soon.
In the worst-case scenario, if the price of the investment falls considerably, the investor will be forced to begin repaying the debt incurred on the credit card. The interest on the outstanding sum, in the meantime, continues to accrue. The investor not only loses money but or also incurs a high interest rate on the capital that has deteriorated.
Do you intend to pay with a credit card?
It is undeniably more costly to purchase crypto with a credit card. When the costs associated with credit card use are eliminated, investors will need to earn at least double-digit returns (think 15 percent or more) to break even. While using a credit card is handy, is the cost of doing so worth it in the long run. A resounding nay is given the vast majority of the time.