Using Crypto To Pay Online: Tips, Dos and Don’ts

By Steven Melendez

Have you used cryptocurrency to shop online yet? Thought about it? Wonder whether it’s a good idea? Concerned about security? Fluctuating value?

Shopping with this digital currency seems a likely choice for shopping online, especially as more and more online stores accept digital currency for purchases. But online shopping using crypto can be a little more complicated than just using a credit or debit card, and it’s important, as with all payment methods, to make sure to avoid scams and fraudsters.

What is bitcoin and cryptocurrency?

It’s real money with real value, but it exists in digital form only. Instead of relying on banks to record transactions the way credit cards do, cryptocurrencies like bitcoin, the first and best-known cryptocurrency, rely on a type of shared database called a blockchain. This database sets the value of cryptocurrency, then stores, relatively anonymously, who has sent money to whom.

Advocates of cryptocurrencies often like that they’re not managed by governments the way traditional currencies are, and that they can be more anonymous than using a credit or debit card. They also point out that cryptocurrencies can sometimes be a more cost-effective way to send money abroad than traditional wire transfers. Critics point to their potential use in illegal activity, including drug sales, and to their often high energy cost.

You can buy cryptocurrencies through a service called an exchange, and you store cryptocurrency in a digital wallet. You can store it yourself on your computer or phone, or you can use the exchange or a third-party service to store it for you. Popular exchanges include Coinbase and Binance, as well as companies like Robinhood and Cash App.

How to buy with cryptocurrency

You can shop online with cryptocurrency at stores that accept it. Online stores that accept cryptocurrency will usually indicate that they do so and say which coins they accept.

Most stores that take cryptocurrency essentially convert it on the spot to dollars or whatever traditional currency they accept for payments. This ongoing conversion means that whatever you’re buying with cryptocurrency depends on the value of that currency that day. Keep in mind that cryptocurrency values can change a lot over a short period of time.

When you go to make a payment with cryptocurrency, follow the instructions on the site to send the currency to the retailer from your cryptocurrency wallet. Make sure to double-check the exchange rate the retailer will charge you and that it seems fair.

As with any payment method, make sure you trust the retailer you’re doing business with before you make the transaction, especially because you generally can’t reverse a cryptocurrency transaction, even for fraud, if something goes wrong.

Cryptocurrency and security

Here’s where you have to be careful. If you give someone the password to your cryptocurrency wallet or exchange account, they can potentially use it to steal your cryptocurrency, and you may not be able to easily recover it. Unlike a credit card or bank transaction, it’s generally impossible to reverse cryptocurrency transactions, so whether using crypto for online shopping or for any other purpose, be diligent about your usernames and passwords and only doing business with stores you trust.

Make sure your computer or phone, or whichever device you’re using, is secure and that you’ve kept up to date with software updates. This will reduce the likelihood of malware being able to obtain your passwords and its creators being able to steal your cryptocurrency. Contact your internet provider for potential security advice and software tools.

Cryptocurrency and exchange rate risk

Keep in mind that most companies providing online shopping with bitcoin or other cryptocurrencies will accept the currencies at the current exchange rate for U.S. dollars or other currencies. You may want to check a third-party website for the current exchange rate and make sure the one you’re being offered is fair. Consider whether you want to spend your cryptocurrency at the current rate or if you’d like to hold onto it until you can fetch a higher price for it.

Also, remember that it’s possible for cryptocurrency prices to drop dramatically, even to zero, if a particular digital currency falls out of favor. Keep track of how much of your savings is held in cryptocurrency, and don’t keep more money in cryptocurrency than you can afford to risk.

Cryptocurrency and credit cards

Generally, buying with cryptocurrency is separate from buying things with a credit or debit card. But there are some credit cards that offer rewards in the form of cryptocurrency, as opposed to other formats like airline miles, gift cards or cash back. This can be advantageous if you’re interested in exploring cryptocurrency as an investment or payment tool.

There are also some debit cards issued by various cryptocurrency wallet providers that allow you to shop with cryptocurrency, even at online and in-person stores that don’t accept it but do accept Visa or MasterCard credit cards. They generally work by converting your cryptocurrency to traditional dollars when you make a purchase. And here are some companies that will accept Bitcoin for shopping.