Cryptocurrency is like the gourd spice of the financial world; it starts to permeate everything.
We have cryptocurrency trading apps, stocks, ETFs, and even cryptocurrency futures.
And now crypto credit cards have officially appeared.
But wait. How it works? Do they reward crypto, let you spend crypto, or both? Do sellers generally accept them? And what are the pros and cons?
Let’s explore cryptocurrency credit cards and see if it’s right for you.
What is a crypto credit card?
A cryptocurrency credit card is basically any reward card that allows you to spend and earn cryptocurrency.
There are two types of crypto credit cards: crypto “reward” cards and crypto “debit” cards.
Crypto reward cards allow you to earn cryptocurrency
A more common type of crypto credit card is the crypto reward card, which allows you to earn some bitcoin or other cryptocurrencies as a reward instead of cash.
Gemini credit cardTMfor example, it has reward levels that may seem fairly familiar: 3% refund on lunch, 2% refund on groceries, 1% refund on all other purchases, etc.
However, this is not a 3% return in USD – instead, the card allows you to choose from a list of more than 50 cryptocurrencies into which you convert your points.
How neat is it?
Source: Giphy.com
Cryptocurrency debit cards allow you to spend cryptocurrency
A less common but rapidly growing crypto credit card option is the crypto debit card. These cards allow you to spend crypto in brick-and-mortar stores, even if they don’t accept crypto.
During the transaction, they work in such a way that the card projects a pre-recorded hologram of El Salvador’s President Nayiba Bukele, who sells to the merchant the virtues of the cryptocurrency until they accept it as a form of currency.
Well, not quite. But there is a real-time conversion. The card company simply converts a portion of your cryptocurrency into USD during the transaction. So it’s not quite a 100% fulfillment of Satoshi Nakamoto’s idea of universal acceptance, but it’s a commendable step forward.
How do crypto credit cards work?
Cryptocurrency credit cards work in much the same way as the reward cards you already have in your wallet. Visa and Mastercard offer perks such as discounts on DoorDash and HelloFresh, as well as consumer protections such as 24/7 monitoring and fraud alerts.
They add the ability to spend directly from your crypto holdings and earn crypto as reward points.
What are some examples of popular cryptocurrency credit cards?
We previously compiled a list of the best crypto cards currently on the market – check out the best crypto credit cards: earn crypto while shopping.
But here are some quick examples:
- Coinbase Map allows you to spend crypto directly from your Coinbase wallet and receive up to 4% back in crypto.
- spot The Wirex card allows you bypass international transaction fees by converting up to 19 cryptocurrencies to 12 fiat currencies (USD, SGD, AUD, NZD, JPY, HKD, EUR, GBP, CZK, MXN, CAD, CHF) for free.
- Finally, it’s worth noting the simplicity of the BlockFi Rewards Visa® Signature credit card, which allows you to earn 3.5% in bitcoin on all purchases for three months, and then 1.5% after that.
What are the benefits of using a crypto credit card?
Low Risk Cryptocurrency Investment Method
You may have been thinking about adding some cryptocurrency to your portfolio, but you are also aware of the risks and therefore not very interested in investing part of your salary.
If so, then spending a year with a crypto credit card might seem like a safer option. You won’t need to buy any cryptocurrencies outright, but by the end of the year, you’ll still have a good portfolio worth around $1,000.
Save on commissions and conversion fees
On the other hand, if you are already a frequent buyer of cryptocurrencies, you are probably tired of wasting some of your investment on commissions and fees.
A crypto credit card offers a nice breathing space as you will earn crypto without having to worry about fixed fees, maker/taker fees, etc.
Finally, you can spend cryptocurrency at Trader Joe’s.
As long as your crypto card has debit features, the last major benefit of having one is that you can finally spend your crypto at your favorite merchants.
While this still requires real-time fiat conversion, it’s faster, safer, and more convenient than clumsily pre-converting some of your investment to USD before heading to Trader Joe’s.
What are the disadvantages of using a crypto credit card?
You cannot receive rewards in USD
One of the main disadvantages of using a cryptocurrency credit card is hidden in plain sight: you can convert your points into all sorts of virtual currencies, but not into the most widely accepted currency on earth: US dollars.
This is a big problem for those who occasionally convert points into cash to pay bills, invest elsewhere, etc.
You can spend cryptocurrency at the wrong time
Thanks to the debit feature, your crypto card will allow you to spend any cryptocurrency at any time.
Now, if you want to be able to spend your cryptocurrency on a whim, that’s fine. But if you want to resist the temptation and keep walking, being able to leave your cryptocurrency on the ledger might be the last thing you want.
No signup bonuses
One area where crypto-currency credit cards lag far behind the competition is in signup bonuses. Big banks like Chase can afford to give every new Chase Freedom Unlimited® customer $200 just to sign up and spend a little.
But neobanks (read: small online banks) that support crypto credit cards usually don’t have that much capital on hand, so crypto card signup bonuses are tiny, if they exist.
Waiting lists
Finally, as of this writing in Q2 2022, most crypto credit cards have waiting lists. Like the Playstation 5, cryptocurrency credit cards are a hot commodity with high demand and limited supply. You may have to wait months or even years to get your first one.
Is a Crypto Credit Card Right for You?
You may need a cryptocurrency credit card if:
If you want to add some crypto to your portfolio without buying it outright (and you don’t have a PC powerful enough to mine it), using a crypto credit card is an acceptable option.
Similarly, if you want to earn and spend crypto more easily with lower fees and barriers, a crypto credit card might be what you are looking for.
Just remember that in any case, you are waiving both the signup bonus and the ability to convert points into US dollars.
You can probably refuse a crypto credit card if:
If you’re not ready to take the plunge and merge all your credit card rewards into cryptocurrency, you’re not missing out. You will be pleased to use one of the best credit cards of 2022.
Summary
Crypto cards are innovative products; the liquidity and versatility they provide to crypto investors helps OG’s bitcoin mission as a fiat replacement.
However, with limited functionality and crypto-currency rewards that cannot yet compete with today’s best cash-back cards, they are a niche product at the moment.
But hey, like the cryptocurrency itself in 2014. Perhaps one day we will see cryptocurrency cards dominate the competitive credit card landscape.
Featured Image: Cryptographer/Shutterstock.com
