There are a handful of ways that you can purchase cryptocurrency — but some of these ways come with consequences that you’re better off avoiding. These are three of them.
1. Credit Card
You can use your credit to purchase pretty much anything. Why shouldn’t you use it to purchase cryptocurrency? There are two major reasons for this.
It’s not always easy to purchase cryptocurrency with a credit card. Many credit card companies won’t allow users to go through with this type of purchase. And many major cryptocurrency exchanges won’t accept credit cards as a form of payment. If the exchanges do accept credit cards, they may limit the types of cards they accept.
Even if you do happen to find a cryptocurrency exchange and a credit card company that will allow you to use your card for the purchase, it’s still not a good idea because the purchase can result in several additional costs.
Cryptocurrency exchanges may charge you a fee for using a credit card. If the exchange is based outside of the country, you may get charged a foreign exchange fee. In addition, your credit card company will likely treat your purchase as a “cash advance,” which will result in a cash advance fee.
2. Home Equity Loan
If you have a home equity loan, you can use it for all sorts of purchases, including investments like cryptocurrency. But just because you can use your home equity loan to purchase cryptocurrency, doesn’t mean that you should.
Why? Cryptocurrency is volatile, which means that you could lose out on your investment — this can make repaying your home equity loan difficult. And defaulting on home equity loan payments comes with a major risk.
A home equity loan uses your home as collateral. If you can’t keep up with payments, your home could go into foreclosure. And if your home’s value decreased since your original purchase, you may still owe your lender even after going into foreclosure.
The same rule applies to home equity lines of credit (HELOC).
3. Emergency Savings
Using your emergency savings to buy cryptocurrency is a terrible idea. You’ll want those savings to be liquid so that you can withdraw them the moment that you get hit with an urgent, unplanned expense. Using those funds to purchase cryptocurrency will prevent you from doing that.
Couldn’t you use your crypto investments for emergencies? Not likely. For one, it will take time for you to trade your investment so that you can access its cash value. Two, you can’t be sure that your investment will be worth cashing out. Your investment’s value could plummet when you need it most.
You’re better off using an alternative payment method like an online loan in an emergency. Find out how to apply for a fast loan online to handle an urgent, unexpected expense. As long as you meet all of the qualifications for a fast online loan, you can fill out and submit the application. Your application could get approved quickly, giving you the funds you’ll need to handle your emergency and move forward. Afterward, you can follow a steady repayment plan.
So, What Should You Use?
Ideally, you should purchase crypto with an electronic funds transfer via a bank account. You can do this by linking your bank account to the crypto exchange or arranging for a wire transfer. You can also buy cryptocurrency with another type of cryptocurrency.
Most importantly, you should only use funds that you’re comfortable losing. If you can’t afford to lose that money, don’t use it to make your crypto investment. It’s not worth the risk.