Bitcoin and other cryptocurrency owners often find themselves in the precarious position of not knowing how to transfer their cryptocurrency into their bank account. Cryptocurrencies offer an exciting new financial frontier and investment opportunity, but what good is investment if you can’t withdraw your profits?
You cannot deposit their cryptocurrency directly into your bank account, yet. . . Instead, users will have to convert their cryptocurrency into dollars, then deposit the currency into their account. How this process is done depends on the platform you hold your cryptocurrency on.
Coinbase not only makes it easy to buy and sell cryptocurrencies, the platform makes transferring cryptocurrency into your bank account an ease. When you start using Coinbase, you can link your bank account. When you want to turn your cryptocurrency into dollars, sell the cryptocurrency for cash, then deposit the cash into your bank account. Usually, Coinbase transfers the money into your bank account within a couple of days.
Bitstamp, unlike Coinbase, does not allow users to link their bank account. Instead, users enter their bank account information every time they want to make a transaction. Bitcoin owners can use the platform to convert their cryptocurrency into cash, then they can enter their bank account information to deposit their earnings.
What to Remember When Converting Cryptocurrencies into Cash
Customers need to be aware of hidden fees. Many banks charge a fee for incoming wire transfers. Cryptocurrency platforms often encourage wire transfers for large money transfers. Consult with your bank to understand any potential transfer fees you may incur. Almost all cryptocurrency platforms charge fees for each transfer, typically ranging from $2 to $50. Transfer fees have become a typical part of trading cryptocurrencies.
Once cryptocurrency traders hit a payday, they often forget that any profit made is taxable income. In the United States, cryptocurrency profits are taxed as capital gains. How much you pay in taxes is dependent on the tax bracket you fall in with your regular income. If you are located outside of the United States, or are unsure of how cryptocurrencies are taxed, contact a local tax professional to understand your situation.
Bitcoin and other cryptocurrencies offer a unique investing opportunity for users. It is currently impossible to deposit cryptocurrency directly into your bank account, so users will instead have to rely on cryptocurrency trading platforms to collect their earnings. While banks may someday offer the option for cryptocurrency direct deposit, a classic transfer will have to do for now. Cryptocurrency users should be aware of any taxes and hidden fees associated with trading.