Worrying number of people buying bitcoin with their credit cards, LendEDU poll finds
A poll commissioned by LendEDU found that almost a fifth of people investing in Bitcoin are incurring credit card debt to fund and purchase the cryptocurrency, confident that the returns from their Bitcoin investment will be more than enough to pay back their credit card bills.
Of the 672 Bitcoin investors that were included in the poll, 18.15% said that they have used a credit card to fund their online account and purchase Bitcoin. Of those that said they used a credit card to buy bitcoin, 22.13% said that they did not pay off their credit card balance after purchasing the cryptocurrency.
The majority (70.37%) of those who didn’t pay off their credit card balance after buying bitcoin “believe owning Bitcoin is worth the interest expense”, whilst almost 90% said they plan on paying off the balances by selling their Bitcoin investments.
LendEDU said that a lot of the data that came from the poll was “concerning”. Firstly, many investors are paying extra fees by using a credit card to fund their account – the largest cryptocurrency exchange Coinbase charges a 3.99% fee. Secondly, those who don’t pay off their credit card debt incurred from buying Bitcoin are putting themselves at a very high level of risk given the volatility of the cryptocurrency’s value.
People purchase cryptocurrencies at cryptocurrency exchanges. They can also sell their digital currencies there.
“Going into debt to buy Bitcoin is not a wise decision no matter which way it is spun. There is no guarantee that Bitcoin investment returns will be profitable in the long run, but one can guarantee that the credit card company will need to be paid back. Considering the average annual percentage rate (APR) on a credit card is 15.07 percent, a Bitcoin investor that finances their investment at the wrong time will find themselves in serious debt.”
“This is especially worrisome when the volatility of Bitcoin is taken into thought. Some of the world’s foremost financial minds predict the virtual currency could crash at some point. Heavily investing in Bitcoin via credit card only to have it crash overnight could lead to a nightmare financial scenario,” Brown added.