Bitcoin’s value has fluctuated considerably in recent years, and its performance in May 2022 saw its value drop below $30,000, half of the $60,000+ it reached in October 2021.
So, if you are considering investing in Bitcoin, be aware that there is no guarantee that you will see a return or break even.
Such volatility has led the UK’s financial watchdog, the Financial Conduct Authority (FCA), to repeatedly warn that cryptocurrency buyers should be prepared to lose all of their investments.
If you’re aware of the risks and still want to buy Bitcoin, here’s how to do it using a credit card.
Sign up with a crypto exchange
To buy Bitcoin, you will need to exchange a currency for it.
However you want to pay for your Bitcoin, you will need to use a crypto exchange. Popular exchanges include Coinbase and Binance.
Choose an exchange with a Bitcoin wallet built into their platform and you won’t have to sign up anywhere else. If you want to keep your cryptocurrency in a wallet outside of your chosen exchange, make sure it allows withdrawals and check what fees, if any, apply.
If you intend to buy Bitcoins with your credit card, check if the exchange accepts the brand you own (eg American Express, Visa, Mastercard).
Pay with a credit card
Once you have opened an account with an exchange, you will need to add funds to it.
Some exchanges charge fees for certain payment methods. For example, Coinbase charges no fees when you add funds to your account via wire transfer, but charges 3.99% when you use a credit card.
Also be aware that when you use a credit card to buy bitcoins, your card issuer will treat it as a cash advance. So not only will you likely pay a fee for the exchange, but you’ll also pay a higher interest rate than you would for a regular credit card purchase.
Plus, you’ll likely be charged interest from the time you make the purchase, whether or not you clear your balance afterwards.
Although rare, there are credit cards that charge 0% on cash advances. However, going into debt to buy Bitcoin is not advisable. If you buy Bitcoin with a credit card, you should try to pay off your balance as soon as possible to minimize the interest it will attract.
In the platform you are using, go to Bitcoin and enter the amount you want to invest. Unless you are investing north of £30,000, you will be buying a share of one Bitcoin. If the value of Bitcoin was £30,000 and you invested £1,000, for example, you would own 3.33% of a Bitcoin.
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Store your Bitcoins securely
You can store your Bitcoin in your exchange’s built-in wallet or, if you prefer and if the exchange allows it, a wallet provided by a third party. But, if you feel comfortable keeping your Bitcoin in a “hot” wallet, i.e. online, you can instead use a “cold” wallet, which is a storage device not connected to the Internet.
Keep in mind that there may be a fee to withdraw your Bitcoin from the exchange, and if you opt for a cold wallet, you will have to keep your access codes safe or risk being locked out. of your own assets.
How to sell your bitcoin
You can also sell your Bitcoin through a crypto exchange, either immediately or when it hits a certain price. Once sold, you can transfer the money to your bank account – although in some cases you may have to wait a few days before you can withdraw it.
If the profits you make from selling Bitcoin are large enough, you will be liable for capital gains tax (CGT). Everyone has an annual CGT allowance of £12,300. If you have earnings in excess of this amount in a given year, you are likely to be subject to tax.