More people are looking for ways to buy Bitcoin with a credit card, with the cryptocurrency up 64% over the past month alone.
It's hard to blame them. The Bitcoin price has soared more than 900% in 2017, far outpacing the 15.5% gains in the S&P 500 index.
The latest surge - which took the Bitcoin price from under $6,000 to over $11,000 in two weeks - has inspired many investors to try to get on the cryptocurrency bandwagon any way they can.
That's why U.S. Bitcoin exchange Coinbase added 300,000 new users over the Thanksgiving holiday week. The new additions brought Coinbase's account total to 13.3 million, according to Alistair Milne, co-founder and chief investment officer of Altana Digital Currency Fund - exceeding the 10.6 million brokerage accounts at Charles Schwab.
The jump in Coinbase accounts also coincided with a spike in Google searches for the phrase "buy Bitcoin with credit card," which reached an all-time peak last week.
It turns out, it's not all that hard to buy Bitcoin with a credit card - there are several ways to do it - but, as I'll show you, this is not necessarily a sound strategy for investing in cryptocurrency.
Here are the best options for U.S. investors...
Several exchanges allow customers to use credit cards to purchase Bitcoin:
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But while it's relatively easy to buy Bitcoin with a credit card, here's why you should think twice before doing it...
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While more Bitcoin exchanges are making it possible to buy cryptocurrencies with credit cards, you may have noticed they also charge a premium for it. You'll get more bang for your Bitcoin buck by purchasing your crypto via almost any other method.
More generally speaking, credit cards have become something of a trap for many average Americans - the 48% that carry a balance. And these balances are not trivial. Last year, WalletHub reported that the average U.S. family had credit card debt of $8,377.
For those who already owe thousands, using a credit card to buy Bitcoin is a very bad financial choice. Adding thousands of dollars to an existing debt with a high interest rate could put you in deeper financial jeopardy.
Sure, it's tempting to use a credit card to "borrow" money to buy Bitcoin, because if it goes up 200%, or 500%, or 1,000%, you'll be able to pay off what you originally spent and then some.
But it's key to remember that Bitcoin also goes down. It's possible it could crash to zero at some point. And the bank that holds your credit card won't be sympathetic if your investment tanks. You'll still have to pay back every penny you borrowed - with interest.
When you factor in the extra fees you're being charged, it just doesn't make sense for those who owe a lot on their credit cards to use them to purchase Bitcoin.
But what about those who pay off their credit card every month?
This group has more leeway in buying Bitcoin with a credit card, but even they can't escape the higher fees the exchanges will charge them. Rewards card holders at least will get back some of the fees in the form of cash or points.
Finally, I'd like to add a piece of advice I repeat often in cryptocurrency stories - never invest more than you can afford to lose.
Don't let the convenience of buying Bitcoin with a credit card obscure that basic bit of wisdom.
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.