Bitcoin’s value has varied drastically in recent years, and its performance in May 2022 has seen it fall to around $30,000 – less than half of the $60,000-plus it reached in October 2021.
So, if you’re considering investing in Bitcoin, keep in mind that there’s no assurance you’ll make a profit or break even. Because of this volatility, the Financial Conduct Authority (FCA), the UK’s financial watchdog, has frequently warned cryptocurrency buyers that they should be prepared to lose their entire investment.
Here’s how if you’re aware of the hazards and still want to buy Bitcoin with a credit card.
Sign a cryptocurrency exchange.
To buy Bitcoin, you must first exchange some cash for it. To pay for your Bitcoin, you’ll need to utilize a cryptocurrency exchange. Coinbase and Binance are two well-known exchanges.
Choose an exchange with a Bitcoin wallet on its platform, and you won’t need to sign up for one elsewhere. If you wish to keep your bitcoin in a wallet other than your preferred exchange, make sure it supports withdrawals and check what fees apply.
If you plan to buy Bitcoin with a credit card, check the exchange allows the brand you have (for example, American Express, Visa, Mastercard).
Paying a credit card payment
After you’ve created an account with an exchange, you’ll need to fund it. Some exchanges impose a fee for specific payment methods.
Coinbase, for example, charges no fees when you deposit money to your account by bank transfer but 3.99 percent when you use a credit card.
Also, if you use a credit card to buy Bitcoin, your card issuer will classify it as a cash advance, which means you’ll likely pay a fee to the exchange and a higher interest rate than you would on a typical credit card transaction.
Furthermore, whether you clear your balance or not, you will certainly be charged interest from the time you make the transaction.
Credit cards carry no interest on cash advances, which is unusual. Taking into debt to buy Bitcoin, on the other hand, is not recommended. If you buy Bitcoin with a credit card, you should aim to pay off your balance as quickly as possible to avoid paying interest.
Place an order
Navigate to Bitcoin on the platform you’re using and input the amount you’d want to invest. Unless you invest more than £30,000, you’ll purchase a share of one Bitcoin.
If the value of Bitcoin was £30,000 and you invested £1,000, you would own 3.33 percent of a Bitcoin.
Store your Bitcoin safely
You can keep your Bitcoin in the integrated wallet of your exchange or, if you prefer and the exchange permits it, in a wallet offered by a third party.
However, if you do not feel comfortable storing your Bitcoin in a ‘hot’ wallet online, you may use a ‘cold’ wallet, a storage device not linked to the internet.
Pay that there may be fees for withdrawing your Bitcoin from the exchange, and if you use a cold wallet, you must keep your access credentials safe or risk being locked out of your holdings.
How to Sell Bitcoin
You may also sell your Bitcoin on a cryptocurrency exchange, either instantly or after it reaches a specific price.
When you sell something, you may send the money back to your bank account – but in certain situations, you may have to wait a few days before you can withdraw it.
If your earnings from selling Bitcoin are significant enough, you will be subject to Capital Gains Tax (CGT). Everyone is entitled to a £12,300 CGT allowance each year. If your gains exceed this amount in any given year, you will be taxed.