Quick startup without your own wallet:
This article is aimed at users who primarily want to use Bitcoins for quick payments on the internet, for instance to pay for a Perfect Privacy VPN account. If you do not want to store any Bitcoins you do not necessarily need your own Bitcoin wallet.
If you want to save some Bitcoins you should definitely create your own wallet with a Bitcoin client. How that works in detail you can read in our Bitcoin Client article.
In any case we recommend to also read the Bitcoin Basics article which explains the fundamentals about Bitcoin. But the information in this article is sufficient to make one-time payments with Bitcoin.
How do I buy Bitcoins?
There are generally two methods to get Bitcoins: By a personal trade, for instance if you have a friend that offers to sell Bitcoins. In this case it is possible to directly exchange for cash.
The other method to buy Bitcoins is using a Bitcoin exchanger. These are web portals where users can buy and sell Bitcoins and deposit and cashout either Bitcoins or Fiat currencies like US Dollar and Euro.
There are a number of exchangers and the decision of which to use will mostly depend on the available deposit and cashout methods and currencies. The trade volume is also a factor: The larger volume a Bitcoin exchanger has, the better the chances are that the service will remain active in the future.
You can find an overview of Bitcoin exchangers here: Bitcoin-Wiki
The Bitcoin Exchanger
We recommend considering three things before deciding on an exchanger: What currencies are supported, what methods of deposit and withdrawal are available and the transfer volume (the latter is also important to buy and sell Bitcoins quickly and to the best possible price).
The biggest exchangers are Coinbase, Kraken, Bitstamp, Bitfinex and BTC-E. For European users, Bitstamp and Kraken are probable best: For one thing they offer EU residents to do SEPA transfers to their bank account which takes a maximum of 48 hours. Also Bitstamp and Kraken have relatively high transfer volumes.
To register an account with an exchanger you basically only need an email address. However, before you are able to do deposits and cashouts you usually need to go through a verification process. Most exchangers require a copy of your government issued ID and a copy of a utility bill showing your address (can be a bank statement or electricity bill). This verification only needs to be done once and can take a few days. Once completed you can process cashouts and deposits at any time.
One advantage of Kraken is that they do not require any documents unless you want to cashout or deposit more that $10.000 a month. So if you don’t like sending a copy of your passport, you should consider Kraken as your exchanger.
If you want to do a one-time payment with Bitcoin you can pay in the corresponding amount from your bank account. You can always check the current exchange rate on the website of the Bitcoin exchanger. Generally it is recommended to deposit 5 to 10 percent more to balance possible variations in the exchange rate.
If you want to frequently pay with Bitcoins it makes sense to keep some Bitcoin in reserve. In this case we recommend creating and using your own Bitcoin wallet so you have full control over your Bitcoins. Please read our Bitcoin Client article for details about that.
Once you have deposited Dollar or Euro at the exchanger, you can convert it to Bitcoin once the deposit is confirmed. The exchanger itself does not sell Bitcoins. Instead other users on the site set up buy and sell orders. This works similar to a stock exchange, some sites even offer to make limit and margin sells. Bitstamp for instance offers a tradeview where you can see the live exchange rate and graphical information about your buy and sell offers.
The most simple method to buy Bitcoin is to use a direct buy order. This is the default option on most exchangers and will just buy Bitcoins at the best possible value. So if you want to buy Bitcoins for $100, you simply enter that amount, click on buy and the order should be fulfilled a few seconds later.
As soon as you have a Bitcoin balance you can use it for payments. Choose “Withdrawal” and go to Bitcoin. Here you can enter the amount and a target Bitcoin address, the label is optional. In the address field you can either use one of your own wallet addresses to transfer the coins to your own wallet or you can use an address given to you by a vendor who is expecting a Bitcoin payment. For instance, you can use the address given by Perfect Privacy to pay for your VPN account.
As described in the client article, all Bitcoin transactions need to be verified via the blockchain. This usually takes between 30 and 60 minutes.
This also works the other way around: If you go to “Deposit” on the exchanger site you are able to fund your account using Bitcoins. Also, you can always request a new address for deposits so that you don’t have to use the same one over and over again.
As soon as a Bitcoin deposit has three confirmations you can use the funds. For instance you can sell the Bitcoins for US-Dollar and then cash them out to your bank account. Note that there are usually restrictions like minimum and maximum deposit amounts.