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Author Topic: How to buy BTC with credit card (2.75% fee, needs: US bank acct, smartphone)  (Read 2140 times)
streblo
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July 17, 2012, 11:44:18 PM
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Chargebacks are a major issue for buying BTC with credit cards, so few services offer BTC with credit card payments. Here, I will show you how to charge your own credit card.

Step 1) Sign up for Square, which will let you use your phone as a cash register. Pay 25cents for their mag stripe reader phone accessory. Link your bank account.

Step 2) Swipe your credit card for X$, that money (minues a 2.75% fee) will show up in your bank account the next day. Note, this transaction is treated like a purchase, meaning you can earn credit card rewards and the APR is better than a cash advance. Rewards are usually ~1%, so although you're charged a 2.75% fee, with rewards this is effectively reduced to 1.75%.

Step 3) Transfer money from bank account to Mt Gox, Dwolla, etc. Or pull out cash and use BitInstant.

I have done this and it worked perfectly  Grin

Enjoy!

If you find this guide helpful, please consider donating. 183dEw42WgMGcJc9WXRakDYp6CzA8aC3zH
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Stephen Gornick
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July 18, 2012, 01:59:04 AM
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I have done this and it worked perfectly  Grin

Well, that's because they didn't happen to notice.  That is, however, a violation of their user aggreement.

Quote
By creating a Square Account, you also confirm that you will not accept payments in connection with the following businesses or business activities:

 - (1) any illegal activity,
 - (2) buyers or membership clubs,
 - (3) credit counseling or repair agencies,
 - (4) credit protection or identity theft protection services,
 - (5) direct marketing or subscription offers or services,
 - (6) infomercial sales,
 - (7) internet/mail order/telephone order pharmacies or pharmacy referral services (where fulfillment of medication is performed with an internet or telephone consultation, absent a physical visit with a physician including re-importation of pharmaceuticals from foreign countries),
 - (Cool multi-level marketing businesses,
 - (9) inbound or outbound telemarketers,
 - (10) prepaid phone cards or phone services,
 - (11) rebate based businesses,
 - (12) up-sell merchants,
 - (13) bill payment services,
 - (14) betting, including lottery tickets, casino gaming chips, off-track betting, and wagers at races,
 - (15) financial institutions offering manual or automated cash disbursements,
 - (16) financial institutions offering merchandise and services,
 - (17) sales of money-orders or foreign currency by non-financial institutions,
 - (18) wire transfer money orders,
 - (19) high-risk merchants, including telemarketing merchants,
 - (20) service station merchants,
 - (21) automated fuel dispensers,
 - (22) adult entertainment oriented products or services (in any medium, e.g., internet, telephone or printed material),
 - (23) internet/mail order/telephone order firearm or weapon sales,
 - (24) internet/mail order/telephone order cigarette or tobacco sales,
 - (25) drug paraphernalia,
 - (26) occult materials,
 - (27) hate products,
 - (28) escort services, and
 - (29) bankruptcy attorneys.


Specifically, #17:

 - https://squareup.com/legal/ua

notme
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July 18, 2012, 02:05:08 AM
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- (Cool multi-level marketing businesses

Nice.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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July 18, 2012, 03:49:56 AM
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I don't think he necessarily violated #17. Maybe he tipped himself for a live shower performance of "I'm a Survivor". Next day he uses the tip he earned to do whatever he wants.

Now if someone else ran their card and he gave that person bitcoins for it, that would violate #17.

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notme
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July 18, 2012, 04:04:51 AM
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I've been thinking about doing this exact thing with my Fidelity 2% rewards card and personal Square account.

Speculation on credit.  Fantastic idea!

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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streblo
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July 18, 2012, 05:02:12 AM
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I don't think he necessarily violated #17. Maybe he tipped himself for a live shower performance of "I'm a Survivor". Next day he uses the tip he earned to do whatever he wants.

Now if someone else ran their card and he gave that person bitcoins for it, that would violate #17.
Exactly.

Stephen, thank you for looking into the regulations -- I admit I haven't looked at them as well as I could have.

I've been thinking about doing this exact thing with my Fidelity 2% rewards card and personal Square account.
All the better with 2% rewards, 0.75% is quite minimal for getting bitcoins with credit!
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July 18, 2012, 05:09:53 AM
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I assume this is only for US citizens , right?
notme
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July 18, 2012, 05:14:21 AM
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I've been thinking about doing this exact thing with my Fidelity 2% rewards card and personal Square account.

Speculation on credit.  Fantastic idea!

I would only do it when waiting on bank transfers to go through, I don't carry a balance on my CC.
I'd much rather pay a .75% fee for BTC instantly, than wait 5-7 business days.

Fair enough.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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streblo
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July 18, 2012, 06:47:10 PM
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I've been thinking about doing this exact thing with my Fidelity 2% rewards card and personal Square account.

Speculation on credit.  Fantastic idea!

I would only do it when waiting on bank transfers to go through, I don't carry a balance on my CC.
I'd much rather pay a .75% fee for BTC instantly, than wait 5-7 business days.

Fair enough.
Obviously maxing out your cards to speculate on bitcoin is a bad idea. OTOH, the interest rates on USD are infinitesimal compared to interest rates on BTC. For example, credit cards offer 12month 0% APR with a 3% transfer fee (3% APR) whereas BTC interest rates are ~7%/week (~3300% APR). Now suppose I want to arbitrage BTCUSD markets, using funds from a credit card can make more sense (with added risk if BTCUSD suddenly crashes).

At any rate, there is undeniable -- perhaps reckless -- demand for CC-USD->BTC (albeit some from scammers, to be sure!) and I hope this guide helps.

Cheers
Stephen Gornick
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July 18, 2012, 10:12:12 PM
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I assume this is only for US citizens , right?

Square is only available in the U.S., so far.  They have plans for going global, apparently, but only support the U.S. for now.

There are clones globally though.

PayPal Here has a dongle that can be used in Canada.  I don't know their policy on using your own credit card though.

Swiff (Singabpore), mPowa (UK), iZettle (Europe), PayLeven (Asia - Singapore, Malaysia, Indonesia, Vietnam, Philippines, and Hong Kong)

And there are more in the U.S. even, Intuit, and more.

Herodes
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July 18, 2012, 11:25:16 PM
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I've been thinking about doing this exact thing with my Fidelity 2% rewards card and personal Square account.

Speculation on credit.  Fantastic idea!

Only if you win.

Remember the rule: Never speculate or gamble with money you cannot afford to lose!
EPiSKiNG
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September 24, 2012, 03:38:49 PM
 #12

I've heard that in the US, credit card companies are required to report to the tax board, so by selling something to yourself, you will be required to pay income tax on whatever money comes in.  Can anyone shed light on this?

Thanks!
-EP

YOU CAN TRUST ME! EPiSKiNG-'s COINS!! BUYING / SELLING BTC - USA --- View my OTC Trading Feedback!!
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Stephen Gornick
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September 24, 2012, 06:07:10 PM
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I've heard that in the US, credit card companies are required to report to the tax board, so by selling something to yourself, you will be required to pay income tax on whatever money comes in.  Can anyone shed light on this?

When payments made in settlement of payment card transactions (e.g., credit card) exceeds a threshold then the payment processor must report that as income to the IRS, using form 1099-K.

That threshold is currently $20K USD but only if you received 200 or more payments in the year.

 - http://www.irs.gov/Businesses/New-1099-K-Reporting-Requirements-for-Payment-Settlement-Entities

What that means is if you sell on eBay and have received $20K in the year on your PayPal, then you'll get a 1099-K reporting that income.

That just means that your income tax return must include this income.  Obviously you will have expenses against that income -- like the cost of the merchandise, the selling fees, shipping costs, etc.   Only on the profit that results would there need to be income tax paid.

Now, while this is a new requirement (2012 the second year where selling activity is subject to this reporting requirement) there have been reports of problems already.  Some payment processors are reporting even those with well under $20K having been reached.   People who received personal payments through PayPal from family members are now finding they now need to keep records, proving that the transfer was truly a gift or for tuition, for example, rather than proceeds from selling on eBay, for instance.


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