Sam works as a network analyst for an algorithmic trading firm. He obtained his bachelor's degree in information technology from UMKC.
Benefits of Purchasing Bitcoins with Coinbase
With Bitcoin mining becoming increasingly competitive, many people are looking for an easy way to get their hands on this new digital currency.
Buying bitcoins isn't as difficult as you may think. In fact, Coinbase makes the entire process very simple.
One of the main reasons so many people like to use Coinbase is because they are a US-based company.
Most of the other Bitcoin exchanges are located in foreign countries, which creates a challenge in transferring funds. Many banks have high fees for international wire transfers and some simply don't offer them at all.
Coinbase also offers very reasonable fees; they charge 1% plus a .15 cent bank fee for Bitcoin purchases using USD. Coinbase does not charge any fees for BTC to BTC transfers.
Keep reading this article to to learn how to create a Coinbase account, add additional security, and make a Bitcoin purchase.
Creating a Coinbase Account
In order to use the Coinbase service, you will need to create an account. Creating an account is free and is very simple to do.
To get started, enter your email address and select a password to use with your account. I recommend using a strong password to prevent potential hackers from gaining access to your account.
Coinbase will send an email to the address you supplied to confirm it is valid. Click on the verification link inside the message to complete the creation of your account.
Enabling Two Factor Authentication
For additional security, I recommend configuring two factor authentication for your account. When this feature is enabled, it requires the use of both a password and an authentication code from your phone to sign into your account.
If you don't have a smart phone, you can still receive authentication codes through text messages.
To enable this feature, sign into your Coinbase account and click on the account settings link under the general section. At the bottom of the account settings page, click on the 'Verify A Phone' link.
After adding your phone number, you can install the Authy app on your phone and enter the code that is generated to complete the setup processes.
Users without smartphones can request either an SMS text message or phone call to complete the verification.
Once the phone has been successfully linked, it will be listed in your account with a status of 'verified.'
If you have access to a backup phone, you may want to link another number to your account in case your primary phone becomes lost, damaged, or stolen.
Linking a Bank Account
Now that you're secured your Coinbase account, you are ready to link a bank account. Linking a bank account with Coinbase allows you to transfer fiat currency in , or out of your account.
Coinbase currently supports the use of either a checking, savings, or business checking bank account.
To start the linking process, click on 'Buy/Sell Bitcoin' in the general section. Then click the link 'Verify a Bank Account.'
Linking an account requires the bank account number and routing number for the bank. This information can either be located at the bottom of a check or by logging into your bank account online.
After you've entered your bank account information, Coinbase will make two small deposits (each less than a dollar) into your account to verify the information.
If the deposits are successful, Coinbase will make a single withdrawal after a few days for the total amount of both deposits.
I received the deposits into my account at Capital One 360 after only one business day, but the time frame may vary depending on which bank you use.
After receiving the deposits in your account, you will need to log back into Coinbase and enter the amount of each deposit. This will successfully confirm that you are the owner of the bank account and also validates the account number and routing information.
After the deposit amounts have been confirmed, the bank account will be listed uder payment methods with a status of verified.
Coinbase allows users to link more than one bank account if needed by using the same process as before.
After a bank account has been linked to your Coinbase account, you can begin purchasing Bitcoins. Level 1 accounts start with a daily purchase limit of 10 Bitcoins per day. Bitcoins are delivered to level 1 accounts 4 business days after purchase.
30 days after your first Bitcoin purchase, you can complete additional identify verification steps to upgrade your account to level 2. Level 2 accounts are able to purchase up to 50 Bitcoins instantly.
To complete a Bitcoin purchase, click on the Buy/Sell Bitcoin link in the general section. Enter the number of Bitcoins you want to purchase in the buy amount field, select the bank account you want to use to fund the transaction, then click the buy Bitcoin button.
The current BTC market price can be seen on the right side of the buy amount box.
Coinbase charges a 1% fee (Plus a .15 cent bank fee) to complete a transaction. I think their fees are very reasonable considering the service they provide.
There are some Bitcoin exchanges (such as Mt. Gox) that have lower fees but many banks do not permit international wire transfers, making these options unavailable.
Confirm the Bitcoin Purchase
Before your purchase is processed, you will receive a buy confirmation screen that confirms the details for the transaction. New users with level 1 accounts will also be able to see what day the coins will be delivered to their account. This date will be four business days from the current date.
After verifying the details of the transaction, click the confirm button to submit the Bitcoin order. Coinbase will send an email when the coins are available in your account.
The status of pending purchases can be viewed by clicking on transactions in the general section. On this page, you can also view previously completed transactions.
Clicking on a transaction will display the details of the individual transaction and also let you know the date and time the Bitcoins will be delivered to your account.
Setting Up a Recurring Purchase
Coinbase also provides the option to make automatic Bitcoin purchases on a recurring basis. Recurring transactions can occur on a daily, weekly, bi-weekly, monthly, quarterly, or yearly basis.
These transactions can continue until a specific number of transactions has been reached, or until they are manually canceled.
One of the best uses for recurring Bitcoin purchases is to dollar cost average your Bitcoins. By purchasing a set dollar amount of Bitcoins on a regular basis, you can take advantage of the fluctuations in BTC price.
Once you have Bitcoins in your Coinbase account, you can transfer them directly to another Bitcoin wallet without any fees. To send coins to another wallet, click on the send money link on the transactions page.
Enter the address of the wallet in the to field, the amount of Bitcoins to send, then click on the send money button to transfer the coins.
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
© 2013 Sam Kear
Brian R Wright on April 28, 2018:
Good article, Sam. I have a lady friend who wants to start buying and holding Bitcoin, probably thru Coinbase, which is where I have an account already. The main question she asks is does she need to have a cellphone or a smartphone to be able to do transactions on Coinbase? She has a web hookup, but doesn't want to go cellular.
Thanks in advance.
I'll also leave as a comment, since I suspect many people are increasingly wary of the cellular networks out of privacy and health concerns.