Chapter 2 - Choosing a payment method

In this chapter you will learn the pros and cons of different payment method when buying Bitcoins

It may surprise you but one of the deciding factors of how much you’re going to pay for your Bitcoins is going to be your payment method, and there’s a good reason for this.

Understanding chargebacks

Whenever a seller accepts any form of payment for buying bitcoins that isn’t hard cash he is exposed to the risk of chargeback. Chargeback basically means that I, as the buyer, can complain to my payment provider (e.g. PayPal, Visa, MasterCard etc.) claiming that I didn’t receive what I paid for or that something else was not to my liking and I would like a refund.

In case this happens the credit card companies may open an investigation but more often than not they will just go with the buyer’s version since it’s their reputation of being a secure payment method that’s on the line.

This is why it’s harder to find places that will sell you Bitcoins using a payment method that allows chargeback (e.g. PayPal and credit cards). Let me explain:

Let’s say I want to buy from you a single Bitcoin and pay you through my PayPal account.

We agree on a price, I pay you, you send me the Bitcoin.

A day goes by and I then contact PayPal and say, “I gave this guy money for Bitcoins and never received them.”

Of course PayPal has no way of checking if that’s true or not (since Bitcoin transactions are hard to trace just like cash). So it is highly likely that that I will get the BTC and my money back.

Because of this, most exchanges won’t allow the purchasing of bitcoins with payment methods that allow chargeback. However, some exchanges will take upon themselves this risk but demand that you verify your identity and also charge a premium price for the coins.

Available payment methods

Credit cards and debit cards

These are probably the most common payment method available. Throughout 2015 many more exchanges now allow you to purchase Bitcoins with a credit card. The main ones are Coin.MX, Coinmama and Circle (US only).credit cards

Buying Bitcoins with a credit card will always require some sort of identity verification and in most cases will come with a premium price. On the other hand the verification process is just a one-time thing and the waiting time for your Bitcoins will be really short.

PayPal and Skrill

If you thought that buying Bitcoins with a credit card was tough, then buying them with PayPal is even worse. At the time of writing this guide it’s still against PayPal’s terms of use to sell someone Bitcoinspaypal logo and accept PayPal credit in return.
Skrill, which is a service somewhat similar to PayPal, has the same policy about Bitcoins. However there are still some “hacks” that can be done in order to buy Bitcoins with your PayPal balance (more on that in Chapter 5).

Wire transfers

Probably the most common method for buying Bitcoins today is through a wire transfer. The reason for this is that once the money goes through to the seller, it cannot be charged back no matter what. So naturally many sellers prefer you pay them using a wire.

Exchanges that accept wire transfers like Bitstamp and Kraken will usually sell Bitcoins for less than those who accept credit cards. However the time until the transaction is complete using a wire transfer is significantly longer (since it takes several days for a wire to go through).


Some websites like Local Bitcoins connect buyers and sellers who are located nearby in order to conduct face-to-face Bitcoin transactions. Of course transactions done with cash (or Fiat money as it is referred to in the Bitcoin ecosystem) are quick and usually

The downside to conducting transactions with cash is that you have to physically meet with the person. Also, you never know who you are dealing with when it comes to cash so it’s important to take the appropriate steps for protecting yourself (see the bonus chapter for more information).

Now that you are familiar with your payment method options, it’s time to pick an exchange.

chapter 1- get a bitcoin walletChapter 3 - Choosing an exchange