The feeling of being able to afford anything is a comforting one. It is also an affordable feeling, considering that banks are eager to shell out credit for their clients in amounts that often exceed the realistic incomes of the latter. The credit card is the instrument that allows such a feeling to nestle in the heart of the client. Walking around with some disposable cash in your wallet is a wondering feeling, but everyone who holds and uses a credit card must remember that there is no such thing as a free lunch and everything we do, use or take for granted will have a price.
If credit card statistics are to be considered in 2022 alone, the level of debt becomes shocking. The average American holds 4 credit cards from three different banks. This number in itself is shocking, considering that each credit card has an interest rate bound to it, meaning the holder will be overpaying. The given woeful state of the economy of the United States is placing additional burden on average citizens, while making credit cards more relevant with the availability of funds they provide. However, it is notable that Generation Z representatives hold only 2 credit cards per individual, which is a 50% decrease compared to older generations, showcasing a growing degree of financial literacy and lack of sources of real income that would be able to cover interest for credits.
Surprisingly, many people are still unaware of the simple fact that there are two types of companies dealing with credit cards. Credit card issuers are banks and other financial institutions that issue the cards to their clients and give them the funds that the cards store. On the other hand, credit card networks are communication systems within the financial infrastructure that make credit cards work. Examples of the latter are VISA and MasterCard, which service the digital structures responsible for transaction information processing.
The volumes of purchases generated using credit cards are staggering, with 2021 holding the absolute record at $3.517 trillion, which in itself showcased a 25.6% increase from the year before. Such a rise is explained by the cancellation of lockdowns after the Covid-19 pandemic and the release of populations onto shopping sprees. In addition, credit card purchases in 2021 amounted to over 77.1% of the entire transacting industry’s total turnover of $4.564 trillion that year.
Such uncontrolled spending has resulted in an immense credit burden on virtually all households in the United States, where every household bears around $8.590 in debt. The given statistics are dreary, considering that since the year 2017 the debt ratio has been rising in large part thanks to the advent of the cryptocurrency industry and cryptocurrency exchange platform operations. Credit cards are the most frequently used form of payment in the world, accounting for 10/35 payments and around 28% of all payment transactions.
The same applies to the purchase of Bitcoins and other cryptocurrencies. Cryptocurrencies in themselves are a very risky asset, on par with credit lines, since they bear the risk of depreciation, much like interest on credit cards that forces the individual to lose funds continuously.
The credit card is only one way to buy Bitcoin, but there are many others. It all depends on which exchange the user resorts to in their strive to become a participant of the cryptocurrency market. Most countries place no restrictions on the use of credit cards and readily allow banks to issue them. The same applies to exchange platforms that allow the purchase of BTC with Apple Pay that in itself can connect virtually any card.
When buying crypto, users need to take into account the safety of the transaction. And that will depend on the platform in question. Using credit cards in itself is not a very secure means, since it entails the use of leveraged funds that will place a debt burden on the user. Bank accounts can also be connected to exchange platform wallets and used for topping up balances, but that exposes the user’s account to hackers in case the platform is breached.
Credit cards can also be used as a means to instantly buy any cryptocurrency available on the market. However, users need to take into account the price at which the purchase is being made, since many platforms have varying commissions and prices that are aggregated based on compiled market data. The instant buy option is just as risky, since phishing schemes are being applied by hackers to dupe users into transferring funds to fraudulent wallet accounts.
Should users decide to sell Bitcoins and then use the proceeds to cover debts, they can resort to off-ramp services. In order to transfer the funds to an external account, like a credit card, users will need to connect their account and pass the necessary identity verification procedures. Coins account for the majority of thefts on the cryptocurrency market, so users need to resort to non-custodial storage in order to keep their assets safe.
The credit card is a vital source of financing for many people. However, it is a source that comes with many strings attached. Users will need to repay debts sooner or later. Using credit cards for cryptocurrency trading is extremely risky, considering the inherently high volatility of digital asset prices and the ensuing risk of losing all invested funds. Users are advised to use other means of topping up accounts for the purchase of cryptocurrencies so as not to step into serious debts and suffer unforeseen financial losses.