When I first decided to buy some Bitcoin, I decided two things:
- I would only wager money I was willing to lose.
- I would use the simplest method possible to get started.
Coinbase was the best approach because of its simplicity.
Why did I choose Coinbase?
With over a thousand digital assets and cryptos out there, deciding which one(s) to buy can be exhausting.
Obfuscating matters further, some cryptocurrencies are not traded in the U.S. at all. For instance, if you want to trade Cardano, you have to create an account on an exchange in China or Korea. If you are a U.S. citizen, and want to use a U.S. based exchange, there are really only two popular choices: Coinbase or Kraken.
I started researching both. When I visited Kraken, I often was met with 502 and other errors. This doesn’t inspire confidence.
- You can buy cryptocurrencies with a credit card.1
- Coinbase limits you to 4 cryptocurrencies (Bitcoin, Bitcoin Cash, Ethereum and Litecoin).
- Coinbase is a U.S. company (based in San Francisco) so it’s subject to U.S. laws.
- Coinbase has a well designed free mobile app.
- Coinbase’s user onboarding setup is easy (i.e. not too onerous).
For someone who is just starting out, Coinbase makes trading cryptocurrencies fun and easy.
How to Trade on Coinbase (Almost) for Free
However, if you want to use a credit card, Coinbase charges a hefty 3.99% fee per transaction to get started.
So, if you purchased 1 Bitcoin at today’s price of $8,515.16 per Bitcoin on 2/2/2018 you would pay $340.52 in fees using a credit card… Yikes!
Of course, these fees make sense for Coinbase because they are just passing on the credit card company charges they incur to you.
The credit card companies are charging Coinbase between 3-4% per transaction just for the pleasure of accepting their cards, whether it’s American Express, Visa or MasterCard.
When I got started, my choice of credit card was the Amazon Prime Visa Card from Chase which gives me 1% cash back on my trade. Of course you can use other cards that will provide you with an even higher cash back return on your trades, assuming your card company will accept cryptocurrency purchases (see notes below).
Using the Amazon Prime card reduced my cost of fees on Coinbase to around 3%.
What is GDAX?
If Coinbase is the perfect starting point for an amateur cryptocurrency trader, GDAX is the professional platform.
GDAX offers institutions and professionals the ability to trade a variety of digital currencies like Bitcoin, Ethereum, and more on a regulated U.S. based exchange.
GDAX and Coinbase work closely with one another in the background, though… And once you’re comfortable with Coinbase, you can trade much less expensively using GDAX and a bank to transfer money to Coinbase/GDAX.
Transferring money from your bank account to GDAX/Coinbase takes a few days.
Then use Coinbase’s professional platform, GDAX, to trade on Coinbase almost for free.
How to Use GDAX
GDAX is the professional cryptocurrency and token trading platform owned and operated by Coinbase.
Once you have a Coinbase account, you can create a free GDAX account using your Coinbase username and password. To create a free GDAX account, just visit GDAX.com to get started and choose “Create Account”.
You can trade Bitcoin, Ethereum, Litecoin and Bitcoin Cash on GDAX, as well as send and receive BTC, ETH, LTC and BCH.
Compared to Coinbase, the fees on GDAX are very low, ranging from .10% to .25% or 1/10 of one percent to 1/4 of one percent, respectively.
When trades are executed on GDAX, the orders show up immediately in your Coinbase account as if they happened there.
- The rules have recently changed regarding Coinbase’s acceptance of credit cards. Coinbase sent out an email yesterday that read (italics mine): “We’re writing because you have a credit card on file and want to inform you of a recent change that may increase the cost of purchasing digital currency with a credit card. Recently, the MCC code for digital currency purchases was changed by a number of the major credit card networks. The new code will allow banks and card issuers to charge additional “cash advance” fees. These fees are not charged or collected by Coinbase. These additional fees will show up as a separate line item on your card statement. Coinbase does not know whether or not your card issuer collects these fees, nor do we know how much they might collect. As a result, we would strongly suggest switching to a debit card or bank account as your primary payment method. You can do that on the following page: https://www.coinbase.com/settings/linked-accounts. We apologize for any inconvenience this might cause.” Also, Bank of America recently announced that they will decline any attempts to buy cryptocurrencies using their credit cards. This includes Bank of America’s business and personal credit cards. Capital One and Discover Cards also prohibit the purchase of cryptocurrencies using their credit cards. Chase does still allow people to use their credit cards to purchase cryptocurrencies.