HOW TO PURCHASE STABLECOINS WITH CREDIT CARD
By olushola chigozie
Table of contents:
- Introduction
- What Are Stablecoins?
- 4 Types of Stablecoins
- Advantages of Stablecoins
- Top 3 Most Popular Stablecoins
- How To Buy Stablecoins With Credit Card on Binance?
- Frequently asked questions
- Final thoughts
INTRODUCTION
Credit card is one of the various payment
methods to buy crypto other than fiat deposit or e-wallets.
Credit cards are also the fastest way to buy crypto.
WHAT ARE STABLECOINS
Stablecoins are a class of cryptocurrencies that attempt to offer price stability relative to unpegged cryptocurrencies like Bitcoin. Stablecoin market value is pegged to the value of a “stable” reserve asset like the US dollar or gold. For example, Binance USD (BUSD), USD Coin (USDC) and Tether (USDT), are all backed on a 1:1 basis with the US Dollar. One BUSD or USDC or USDT is the same as one US dollar.
TYPES OF STABLECOINS
1.Commodity-backed Stablecoins:
The second entry in answers to ‘what are the different types of stablecoins?’ brings the limelight on commodity-backed stablecoins. As the name clearly implies, commodity-backed stablecoins have the backing of different types of interchangeable assets such as precious metals. The most common commodity used as collateral for commodity-backed stablecoins is gold.
In addition, you could also find many other stablecoins with the backing of assets such as real estate, oil, and precious metals other than gold. The owners of commodity-collateralized stablecoins basically exercise ownership over a tangible asset with real value. This is a formidable advantage over the majority of cryptocurrencies.
The commodities generally offer possibilities for appreciating in value over the course of time. As a result, such types of stablecoin tend to offer better incentives for people holding and using commodity-backed stablecoins. Furthermore, commodity-collateralized stablecoins also enable the possibility for anyone in the world to invest in precious metals such as gold.
Traditionally, such commodities were restricted only to the financially privileged class. However, commodity-backed stablecoins create new opportunities in investment for the average person, irrespective of geography.
2.Fiat-collateralized Stablecoins:
Fiat-collateralized stablecoins are the foremost variant of stablecoins you would come across. They have the backing of a fiat currency such as Euro, GBP, or the US Dollar. Fiat-collateralized stablecoins are the simplest stablecoin types with a 1:1 ration backing. The 1:1 ration implies that one stablecoin would be equal to one unit of currency such as a dollar or one Euro.
Therefore, every fiat-backed stablecoin has real fiat currency in a bank account for backing it up. Users can redeem their coins as the entity managing the stablecoin takes the corresponding amount of fiat currency from their reserve and sends it to the user’s bank account. At the same time, the equivalent amount of stablecoins are taken out of circulation or destroyed.
Fiat-backed stablecoins are one of the simplest stablecoin categories due to their structural advantage. Simplicity offers the most valuable advantage for beginners to understand cryptocurrencies in a better way. Therefore, fiat-backed stablecoins could have a huge role in encouraging the large-scale adoption of stablecoins. The stability of the country’s economy ensures limited fluctuation in the value of stablecoin.
3.Algorithmic Stablecoins:
The final addition among stablecoin categories would take us to non-collateralized or algorithmic stablecoins. Non-collateralized or algorithmic stablecoins do not have any assets or collateral for backing them. So, how are algorithmic stablecoins classified as stablecoins when they don’t have any collateral for backing them up?
The non-collateralized or algorithmic stablecoins follow an algorithm for controlling the stablecoin supply. Such a type of approach is also known as seignorage shares. With the rise in demand, new stablecoins will be created to reduce the price to the normal level. In event of considerably low coin trading, coins on the market are purchased up for reducing circulating supply.
Basically, algorithmic stablecoins could offer stability according to the tenets of market supply and demand. In addition, it is also important to note that algorithmic stablecoins feature the highest level of decentralization and independence. On the other hand, such algorithmic types of blockchain depend on continual growth for ensuring success. You should know that there is no collateral involved with algorithmic stablecoins for liquidity, and everyone can lose their money in case of a crash.
4.Crypto-backed Stablecoins:
Well, this may seem a bit out of place when you think of cryptocurrencies backing up stablecoins. What about the volatility of cryptocurrencies? How can you expect stability in stablecoins which are backed by cryptocurrencies? As a matter of fact, crypto-collateralized stablecoins offer better decentralization in comparison to fiat-collateralized stablecoins. In addition, stablecoins are generally over-collateralized for absorbing price fluctuations as collateral. Let us try to understand the crypto-backed types of stablecoin with an example.
Assume that you have to deposit almost $1000 worth of Ether for obtaining $500 worth of stablecoins. Therefore, you can see that stablecoins are 200% collateralized, thereby implying the possibility of enduring a price drop of 25%. After the price drop, you would still have the $500 worth of stablecoins, albeit with the backing of $750 worth of Ether. If the price of cryptocurrency collateral drops considerably, then stablecoins will be automatically subject to liquidation.
The most crucial trait you can identify in this entry among stablecoin categories is decentralization. Crypto-backed stablecoins could help processes become more trustless with improved security and better transparency. Without any single entity in control of your funds, you have the benefit of decentralization.
Furthermore, certain crypto-backed stablecoins also have the backing of multiple cryptocurrencies for ensuring efficient risk distribution. Additionally, crypto-backed stablecoins also have the advantage of improved liquidity. However, crypto-collateralized stablecoins are one of the most complex stablecoin types in use right now.
ADVANTAGES OF STABLECOINS
Stablecoins are versatile and powerful tools for investors, traders, and cryptocurrency users. Their main strengths include the fact that:
1. Stablecoins can be used for day-to-day payments:
Shops, businesses, and individuals value stability. Due to high volatility, cryptocurrencies haven’t achieved widespread use for payment processing. Large stablecoins have a track record of maintaining their peg, making them suitable for daily use.
2. Stablecoins have the benefits of being blockchain-based:
You can send a stablecoin to anyone globally who has a compatible crypto wallet (which can be created for free in seconds). Double-spending and false transactions are also almost impossible to do. These qualities, and more, make stablecoins incredibly versatile.
3. Stablecoins can be used by traders and investors to hedge their portfolios:
Allocating a certain percentage of a portfolio to stabilized coins is an effective way to reduce overall risk. Your portfolio as a whole will be more resistant to market price swings, and you will also have funds on hand in case a good opportunity shows up. You can also sell crypto for stablecoins during a market downturn and repurchase them at a lower price (i.e., shorting). Stablecoins allow you to enter and exit positions conveniently, without the need to take money off-chain.
TOP 3 MOST POPULAR STABLECOINS
1.Tether (USDT), at price of $1.00 and $ 73.20B market cap
2.USD Coin (USDC), at price of $1.00 and $ 53.19B market cap
3.Binance USD (BUSD), at price of $1.00 and $ 6.95B market cap
4.Dai (DAI), at price of $1.00 and $ 6.57B market cap
* These prices are a reflection of 24 May 2022’s prices.
* This list is ranked according to market cap and does not constitute a recommendation or endorsement by Binance to buy or sell any currency.
HOW TO BUY STABLECOINS WITH CREDIT CARD ON BINANCE?
Step 1:
Log in to your Binance account and click [Buy Crypto] — [Credit/Debit Card].
Step 2:
Here you can choose to buy crypto with different fiat currencies. Enter the fiat amount you want to spend and the system will automatically display the amount of crypto you can get.
Step 3:
Click [Add new card].
Step 4:
Enter your credit card details. Please note that you can only pay with credit cards in your name.
Step 5:
Enter your billing address and click [Add Card].
Step 6:
Check the payment details and confirm your order within 1 minute. After 1 minute, the price and the amount of crypto you will get will be recalculated. You can click [Refresh] to see the latest market price. The fee rate is 2% per transaction.
Step 7:
You will be redirected to your bank’s OTP transaction page. Follow the on-screen instructions to verify the payment.
Frequently Asked Questions:
1. If I use a bank card to purchase crypto, what are the supported payment methods?
Binance supports Visa card or Mastercard payments.
Visa is accepted for cardholders in European Economic Area (EEA) countries, Ukraine, and the UK.
Mastercard payments are available in the following countries and regions: Colombia, Czech Republic, France, Germany, Indonesia, Italy, Latvia, Luxembourg, Mexico, Norway, Poland, Slovakia, Slovenia, Spain, Switzerland, Turkey, UK, Ukraine, etc.
2. It said that my card’s issuing country is not supported. What card-issuing countries does Binance currently support?
Visa is accepted for cardholders in the European Economic Area (EEA) countries, Ukraine, and the UK. Mastercard payments are available in the following countries and regions: Colombia, Czech Republic, France, Germany, Indonesia, Italy, Latvia, Luxembourg, Mexico, Norway, Poland, Slovakia, Slovenia, Spain, Switzerland, Turkey, UK, Ukraine, etc.
3. How many bank cards can I link to my account?
You can link up to 5 bank cards.
4. Why do I see this error message: “Transaction declined by issuing bank. Please contact your bank or try a different bank card.”?
This means that your bank card does not support this type of transaction. Please contact the bank or try with a different bank card.
5. Will the transaction be canceled if I cannot complete the purchase within the time limit?
Yes, if you do not complete the order within the time limit, it becomes invalid and you need to submit a new transaction.
6. If my purchase fails, can I get back the paid amount?
If payment has been deducted for failed transactions, your payment amount will be returned to your card.
7. After the order is completed, where can I see the crypto I purchased?
You can go to [Wallet] — [Overview] to check whether the cryptocurrency has arrived.
8. When placing an order, I’m notified that I’ve already reached my daily limit. How can I increase the limit?
You can go to the [Personal Verification] to upgrade the account authentication level to upgrade to your account limit.
9. Where can I view my purchase history?
You can click [Orders] — [Buy Crypto History] to view your order history.
FINAL THOUGHTS
It’s difficult to find an investor or trader nowadays who hasn’t held a stablecoin at some point. Stablecoins are often held in crypto exchanges so that traders can quickly capitalize on new market opportunities. As we’ve discussed, they are also very useful to enter and exit positions without having to cash out into fiat. Apart from trading and investing, stablecoins can be used for making payments, worldwide transfers, or earning passive income with staking in the DeFi ecosystem.
Even though they are an integral part of crypto and enabled the creation of a new financial system, you shouldn’t underestimate the risks. We’ve seen stablecoin projects with failing pegs, missing reserves, and lawsuit problems. So while stablecoins are incredibly versatile tools, don’t forget they are still a cryptocurrency and hold similar risks. You can mitigate risks by diversifying your portfolio, but make sure to do your own research before investing or trading and don’t invest more than you can afford to lose.
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