What you should know before you buy bitcoin with credit cards

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There are several ways you can buy bitcoin with your credit cards. You can either use a bitcoin exchange (highly recommended), use a bitcoin ATM or buy from people selling in your community. Check the forum for the list of exchanges that connects directly with your bank accounts.

Just like with a regular bank that requires an account number to save your money, you need a digital wallet with an address to store your bitcoins.

Every exchange have this feature built in them. Just see the exchanges as a regular bank. These exchanges are responsible for issuing out wallets addresses for the different cryptocurrencies they support.

For example, Luno supports Bitcoin and Ethereum. That means by default, when you open an account with Luno, you’ll be given a Bitcoin and an Ethereum wallet address separately.

A wallet is just like a bank account where you keep your digital assets. There are wallets which are solely for a particular coin and there are other wallets which are meant for keeping multiple coins.

A bitcoin wallet will not accept any other cryptocurrency in it. It follows the same logic for fiat currency. A US dollars account will never accept a British pounds or Euros in it.

There are basically two types of wallets: online and offline wallets.

Online wallets are also called hot wallets and offline wallets are called cold wallets. Your hot wallets (online wallets) are like your Checking account. Your cold wallets (offline wallets) are like your Savings account.

The simplest way to differentiate a cold wallet and a hot wallet is that hot wallets are connected to the internet and not in your control (e.g. those provided by exchanges) while cold wallets are in your control. You’re fully responsible for keeping them safe and secured.

Most people with digital assets have both cold and hot wallets because they are designed for different purposes.

People with digital assets keep small amount of money in their hot wallets for making immediate purchases and the remaining are stored in their cold wallets.

This security measure is highly encouraged because hackers cannot steal digital assets that are not connected to the internet.

The security of your hot wallets is dependent upon the security habits of individuals and third parties. They are vulnerable to online theft because they are constantly connected to the internet. A hacker probably won’t waste their resources trying to gain access to small amount of money.

You are not in full control of the funds in your hot wallets because the exchanges keep the private keys with them. Some examples of online wallets are Blockchain.info, Coinbase, Luno, Poloniex, Bittrex, Yobit etc.
Check the comments section for the link to all the trusted exchanges on Coin Market Cap.

If any of these exchanges is hacked (not that easy though but it can happen), there are two scenarios: it’s either your funds go missing totally or your funds are returned if the company have a good insurance.

Offline wallets are also known as paper wallets. Some examples of offline wallets are Coinomi, Copay, Jaxx, Mycelium, and others. Coinnomi is a mobile app and it’s free for Android users. They are highly recommended.

You have full control over your paper wallets with your private key or seed phrase or paraphrase. Keep these keys safe. Without these keys, password, and two factor authentication, no one will be able to access your account or funds even if you have millions of dollars in it.

Once you pass this stage, the vendor or wallet provider doesn’t have your funds on their cloud system. So, they don’t have any way to recover or have access to your funds.

For example, Coinomi does not know your passphrase. Coinomi is just an interface to access your funds which is sitting on the blockchain network (the technology of bitcoin).

So, if Coinomi as a company folds up today, you have nothing to fear or lose. You simply set up another network or software with your private and you’re set. You can then have access to your funds since it is on the blockchain.

Also, when you lose your private key, you can only use your wallet address to view your funds on the blockchain but you cannot have access to it. You should also setup two factor authentication. This is very important. You can download the Google Authenticator App from Playstore.

Your offline wallets can be hacked if your private keys or pass phrase are saved online. A simple way to prevent this from happening is by writing down your keys on a piece of paper or in an offline cloud system. That’s why they are also called paper wallets.

These are the basic things you need to know before you buy bitcoin with your credit card.