How to Buy Bitcoin

So you've seen the light. Now how do you get yourself some bitcoin?  We detail how to buy bitcoin from exchanges and offline, with bank wire, credit cards or even paypal.  

Written on: May 9

If you are wondering how to buy bitcoin, look no further. This article will guide you through the process of getting your first bitcoin online. While the most common account funding method is the bank transfer, some brokerages have started to facilitate credit card payments and, though not as easy as one would think, you can also buy bitcoin with paypal and other e-payments.  And an assortment of clever methods have even been set up to allow buying bitcoin with cash! We first take a quick look at how to open a bitcoin exchange account, and then move on to examine all these different payment options for buying bitcoin. 

Opening your First Bitcoin Exchange Account

The bitcoin market is jam packed with different exchanges, some of whom offer their services globally, others who cater their products to deliver localized solutions. Generally speaking, these exchanges allow deposits only through bank wire, though there are some exceptions offering alternative bitcoin buying methods. Getting set up with an exchange can be a bit of a headache, but there is simply no alternative for convenient and quick access to the market. For comprehensive analysis of where to buy bitcoin, please check out our bitcoin exchange reviews; however, we also list below five exchanges, each of which corresponds to a different market:

[jump to bank transfer] [jump to credit card] [jump to paypal] [jump to cash]

Where to Buy Bitcoin

  • BITREVIEW

    Insured USD and bitcoin wallets

    Liquid, low-fee exchange in multiple currencies

    Integrated Debit Card

  • BITREVIEW

    Local Bitcoins operates everywhere!

    Cash, paypal, e-payments, gift cards and more!

    Sellers might request KYC docs

  • BITREVIEW

    Top international exchange by USD volume

    Robust platform, lending and margin markets

    Excellent trading fees, but bank in Hong Kong

  • BITREVIEW

    Great Canadian exchange, local deposit options

    Top CAD/BTC, CAD/ETH, BTC/ETH liquidity + low fees

    Decent trading platform and merchant services

  • BITREVIEW

    Europe's best exchange, top BTC/EUR liquidity

    Low fees, SEPA rates, excellent trading platform

    Now available for US and Canadian traders!

Regulated exchanges are required to collect data on their customers, a process called KYC (know your customer). The user friendliness of this process varies from exchange to exchange and market to market, but generally you should be prepared to submit a copy of a valid government-issued ID card, and proof of residence - which could be a bill, a bank statement or a payroll slip - making sure your name and address are clearly stated, and the document is less than three months old.

Buy Bitcoin Using your Bank Account

Once an exchange account has been verified, traders must wrestle with the deceptively simple question - what’s the cheapest way to get funds into a bitcoin exchange?

The luckiest among us live in liberal markets in which bitcoin exchanges are able to establish local banking partnerships.  US exchanges like Coinbase and Circle offer ACH transfers allowing free, albeit slow, deposits from US-based banks.  All Canadian exchanges of note - Cavirtex, Quadriga and CoinTrader -  provide INTERAC e-transfer services, though exchange-added fees do vary significantly.  EU traders are able to take advantage of SEPA rates when transferring money to European exchanges, like Kraken, BitStamp or ANXbtc,  with EU-based banks.  While SEPA charges might vary, banks are forbidden from charging lower fees for domestic residents than those offered to the wider Eurozone, meaning traders can at least be comfortable knowing they’ve gotten the best available rate.

For UK residents it is a bit more difficult, as local banks have universally rejected partnering with UK bitcoin exchanges, for whatever reason.  Traders are thus forced to transfer money to foreign banks, absorbing higher SEPA rates - generally between 9 and 20 quid - or international wire fees, which can get exorbitant. Speaking of international wire fees, direct funding of the large international exchanges, such as Bitfinex or OKcoin, will cost quite a bit due to their banks being located in the Far East.

Using a Local Exchange as a Bitcoin Payment Gateway

Which brings us to the payment gateway option. As transferring bitcoin between accounts is usually free, traders can avoid international wire fee charges by simply opening an account with a local exchange, making the initial purchase of bitcoin, and then transferring the bitcoin to the chosen international exchange for trading. As a bonus there are generally far less, if any, KYC requirements for accounts in which fiat currency cannot be deposited or withdrawn. When the user would like to withdraw bitcoin into fiat, the process should simply be reversed - transfer the bitcoin to the chosen local exchange, exchange to fiat and withdraw.

[back to top]

How to Buy Bitcoin with Credit Card

The reversible nature of credit card transactions comes into stark focus when considering their use in buying bitcoin. One of the foundational aspects of bitcoin is the immutable nature of transactions - once a bitcoin has been transferred to a particular wallet, it cannot be reversed. How can it be assured that a customer who buys bitcoin with a credit card will not, after the bitcoins hit his wallet, reverse the credit card transaction?

This is an issue with which exchanges have been struggling, but some offer credit card deposit options nevertheless. The chargeback issue is somewhat mitigated in the UK, where a four-digit pin is required to verify transactions online. It is much more difficult, though of course not unheard of, to claim a credit card has been stolen when the transaction has been verified by a private pin number. Many UK-based brokers - most notably Coincorner and Bittylicious - do accept credit card deposits due to pin verification. Coincorner even allows customers to buy bitcoin with a debit card, which seems to be unique to their exchange. And in the US, user-friendly brokerage Circle accepts credit and debit card payments,capped at $1,000 a week.

How to Buy Bitcoins with Paypal

The same chargeback issues prevalent in credit card transactions also complicate efforts to buy bitcoin with PayPal. Indeed, it was quite common until November 2014, when Paypal excluded the inclusion of "intangible goods" from their buyer protection policy, for a bitcoin buyer to simply wait a few days and reverse the transaction, leaving the bitcoin seller with no bitcoin, no cash and no recourse. However, according to PayPal's July 1st, 2015 amendment to its terms: "We are increasing the scope of PayPal Buyer Protection to now include coverage for intangible items." Whether this will return the paypal bitcoin dynamic to the bad old days remain to be seen. The effect is, however, that the only mechanism for directly buying bitcoin with PayPal is through LocalBitcoins, and even there sellers are understandably weary of accepting such payment, particularly when dealing with new users with little or no reputation.

There are additional e-payment solutions that can be used to buy bitcoin as well. Of these solutions OKpay is probably the most popular with the bitcoin crowd, and is accepted by OKcoin, btc-e, Cubits, LocalBitcoins, and decentralized exchange Coinffeine. The fee charged on the exchange side is generally around 1%, so depending on local charges for funding the OKpay account this could be a reasonable alternative to bank transfer.

Buy Bitcoins with Cash

Speaking of LocalBitcoins, for those of you wondering how to buy bitcoin with cash, this is the most common solution. LocalBitcoins directly connects buyer and seller, who are able to determine together how any particular exchange will take place. There is a strong and very passionate demographic that buys and sells bitcoin offline through Localbitcoins, with exchanges of bitcoin and fiat currency taking place face to face. While the vast majority of these transactions go off without a hitch, meeting strangers for commercial transactions does carry some risk. If the face-to-face concept does not appeal, check out BitQuick, a primarily US-orientated product in which a buyer deposits cash directly into a bitcoin seller’s bank account, while BitQuick holds the coin in escrow. Alternatively, LibertyX has developed a network of 10,000 stores across the US in which bitcoin vouchers can be purchased for cash and redeemed online. And if you happen to live in Vancouver, exchanges Quadriga and CoinTrader allow customers to drop by their offices to deposit cash directly into exchange accounts.

[back to top]

Other Ways to Get Bitcoin

Bitcoin Mining

For those who really would like to get their hands dirty, bitcoin mining not only provides a most likely inefficient and costly method of earning bitcoin, it offers an immersive crash course into the inner-working of the technology. Investing a bit in some mining gear - not investing more than one can afford to lose, mind you - is perhaps the best form of learning by doing, and much information can be gleaned from the experienced members active in the various mining pool forums.

Bitcoin ATMs

Bitcoin ATMs takes a cash deposit and transfers the corresponding amount of bitcoin directly into your wallet. You do pay for convenience, as exchange rates are as high as 8% above exchange prices. There are numerous bitcoin ATMs popping up around the world which can be found on this map - though the ATMs are usually limited to large cities. Additionally, the largest bitcoin ATM provider, robocoin, recently took the decision to force customers to utilize Robocoin's proprietary wallet when deposition - a wallet which requires standard KYC processes. ATM competitor Lamassu recently launched an open source software called Rakia, which allows ATM operators the ability to determine KYC procedures themselves based on local regulation.

Bitcoin ETFs

Perhaps a sign of Bitcoin's coming of age, the Bitcoin Investment Trust (BIT) recently launched an exchange traded fund called GBTC. BIT was first to market, beating out the well publicized future-launch of the Winklevoss twins (of facebook fame) COIN etf, which should be launching any day now. GBTC can be bought and sold directly from existing online stock trading accounts, without the need to open any bitcoin wallet or exchange account, and free from any concerns as to the security of the actual bitcoin from theft. However, this convenience comes at a premium, with GBTC charging a 2% annual maintenance fee, which would come on top of any additional fee charged from hedge funds or trading accounts. While it might be an interesting vehicle for those wishing to invest a portion of their retirement savings in bitcoin, for those able to buy bitcoin from a bitcoin exchange the fund makes little sense.

There is No Such Thing as a Free Bitcoin

There are a number of so-called bitcoin faucets offering "free bitcoin" in exchange for customers fulfilling some sort of task. Tasks generally consist of visiting third-party sites, who compensate the bitcoin faucet for the traffic, with part of that compensation passed back to the user. The amount of bitcoin offered is infinitesimally small, usually consisting of just a few bits - with each bit possessing a value of approximately .00025 of one penny. This makes it simply not worth the effort if the goal is to "earn bitcoin" - however, for those interesting in getting their feet wet, perhaps testing out a wallet and seeing how all the functionality works, this is an easy no-risk entry point.

If you would like more help in picking an appropriate bitcoin exchange, we offer dozens of detailed reviews in our bitcoin exchange guide.

[Back to Top]

Bitcoin Price (USD): 853.48