Prepaid cards are a simple and convenient way of paying for goods and services with the money you actually own.
It’s now possible to use prepaid cards to buy cryptocurrency at many of the major exchanges. The fees charged tend to be higher than for bank transfers, but there are several reasons why some people are turning to prepaid cards.
If you’re thinking of buying Bitcoin, Ethereum, or another digital currency with a prepaid card, read on to discover the steps you need to go through.
What is a prepaid card?
Prepaid cards, also known as everyday cards, work in a similar way to a pay-as-you-go mobile phone. You load them with cash when you first buy them and top them up when the cash starts to run out.
Unlike a credit card, a major advantage of a prepaid card is you can’t run up debts on them. They only allow you to buy goods or services with the money you actually own. This makes them a useful budgeting tool and it means you don’t have to go through a credit checking process when you apply for one.
Another benefit of not having a credit facility is that if you fall victim to a scam, your losses are limited to the amount of money on your card.
Prepaid cards that have the MasterCard or Visa logo on them can be used anywhere that accepts these card scheme networks.
Why use a prepaid card to buy crypto?
A bank transfer is generally considered the best way to buy crypto because the fees are cheaper and it carries less risk than paying by card. For some people, however, paying by card is an easier and more convenient option.
Using a card enables you to buy crypto instantly, whereas with a bank transfer it can take around three to five days for the crypto to reach your account.
Many crypto exchanges accept traditional debit and credit card payments, but these have their drawbacks. Buying cryptocurrency with a credit card is an especially risky strategy.
According to a survey by LendEDU, more than a fifth of investors who used a credit card to buy Bitcoin didn’t pay off their purchases straight away.
Planning to use profits from Bitcoin – or any other cryptocurrency – to pay off a card balance is risky because there is a high chance the value of Bitcoin will plummet.
Equally, many banks offer overdraft facilities alongside debit cards, which means you can essentially use them like a credit card by borrowing from the bank.
A prepaid card enables you to buy crypto with a card but without the risk of spending more money than you have and being unable to pay it back.
How to use a prepaid card to buy crypto
There are lots of cryptocurrency exchanges that enable you to buy crypto with a prepaid card.
The process is pretty much the same as buying crypto with a debit or credit card – you just need to make sure you’ve loaded your prepaid card with sufficient funds.
When you’re comparing exchanges, one of the main things to look out for is how much they charge for card purchases. Fees are typically between 4% and 5%, whereas with a bank transfer, the fee could be less than 1%.
Once you’ve selected an exchange, the first step is to download and install a wallet that supports your chosen cryptocurrency.
You’ll then need to register for an account at the exchange – a process which will most likely include providing ID documents to prove it is you.
Once you’re registered, you can select your preferred payment method option – in this case credit/debit card – and add your prepaid card. It’s worth noting that some exchanges don’t support cards without an associated billing address.
When your card is added, you can then buy your chosen coins using the cash on your prepaid card. It’s important to withdraw your crypto and transfer it to your digital wallet to keep it safe and secure.
Conclusion
Using a prepaid card isn’t the cheapest way of buying cryptocurrency, but it’s an appealing option for those seeking a fast, simple, and convenient method of making purchases without spending more money than you own.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.