March 24, 2022 - 15 min read
With the crypto industry booming, crypto credit cards have become incredibly popular. But how do they work? In this article, we’ll review everything you need to know about crypto credit cards, including how to choose a card, the best cards, and the differences between crypto credit and crypto debit cards.
First, it’s important to realize that there are two different types of crypto credit cards. One type of crypto credit card is nearly identical in operation to a traditional credit card and has to be paid off with a traditional bank account. These cards are only called crypto credit cards because they offer rewards denominated in crypto that are deposited in the user’s wallet.
The second type of crypto credit card, which is significantly more popular, actually allows the user to borrow against the funds in their wallet and pay back their credit card bills in cryptocurrency. Every card works a little bit differently, so it’s essential to understand how your crypto credit card works before you go on a spending spree.
In general, as long as the retailer you’re paying accepts the type of credit card (i.e. Visa, Mastercard) you’re using, the fact that it’s a crypto card shouldn’t make a difference.
If you want to spend your crypto and get rewards for it, a crypto credit card could be ideal, but in some cases, a crypto debit card could be a better choice. A crypto debit card acts exactly like a traditional debit card, but instead of using funds in your bank account, you’ll directly use the funds in your crypto wallet. Like crypto credit cards, crypto debit cards generally offer crypto rewards for your purchases.
Crypto debit cards instantly convert a user’s crypto into the local currency and can be a great way to avoid paying credit card interest rates on your purchases, so crypto debit cards can be a great choice for frequent travelers.
Crypto debit cards can also be beneficial for those living in countries currently suffering from high inflation rates, like Argentina or Turkey, particularly if the user holds a fair amount of stablecoins in their wallet. Most crypto debit cards allow for the conversion of a wide range of cryptocurrencies, so you don’t have to keep your money in a specific crypto in order to use the card.
Like a crypto credit card, as long as the retailer you’re paying accepts the type of debit card brand you’re using, you should be fine when it comes to checking out. It’s important to realize that crypto debit card transactions, just like regular debit card transactions, are fully taxable in the eyes of the IRS.
The IRS sees crypto as property (like stocks or real estate), rather than currency, so you have to report your capital gains or losses each tax season, including any gains or losses related to the use of your crypto debit card.
While crypto debit cards prevent you from paying credit card interest rates on your purchases, they can get expensive to use, as you will need to pay gas fees for selling your crypto whenever you spend it. Most debit card issuers do not charge additional fees, but you should check with your individual debit card provider to be sure.
If you choose to use an ATM to pull funds out of your wallet, you will typically be charged the standard ATM fee, in addition to a fee from the debit card issuer. However, some crypto debit card issuers may waive additional ATM withdrawal fees, so this is another aspect to check before choosing which crypto debit card is right for you.
When deciding which crypto credit card (or debit card) is right for you, there are a variety of factors to consider, including:
Card fees: Fees are one of the most important things to consider when choosing a crypto credit card, since if fees are too high, you may not even want to use a crypto credit card in the first place, and instead may want to opt for a traditional credit card.
Different cards have a variety of different fee structures, so you should look deeply into the fees, terms, and conditions before choosing which card is the best option for your individual needs. If a card issuer is not transparent with their fee structure, it could indicate that the card carries hidden fees, which is something you’ll want to avoid at all costs.
Hidden fees could include currency conversion fees for non-U.S. dollar transactions, or hidden overage fees for transactions over a certain amount.
Card reliability: Some cards are more reliable than others, and if you plan to use your crypto credit card to pay essential expenses, like rent or insurance, you don’t want to be left in a sticky situation if your card fails to work properly.
Since crypto credit cards are such a new product, it’s generally a good idea to stick with cards issued by major credit card companies and exchanges to increase the chance that your card won’t malfunction when you need it.
Card rewards: Getting rewards is perhaps one of the major reasons that users are flocking to crypto credit cards, so getting a card that offers a high level of rewards is key. Most cards offer rewards of 1-2%, but some cards offer rewards of 5% or more.
However, these high reward cards often force users to buy and hold tokens, which is expensive and risky in its own right. It’s also important to note which crypto the rewards are offered in; for instance, some cards offer only Bitcoin rewards, which you may or may want to hold. Converting your crypto to another cryptocurrency has its own transaction fees, which will cut into your reward benefits.
Ease-of-use: If your crypto credit card is challenging to use, it may not be worth using it in the first place. Quality cards make the payment process hassle-free, are transparent and upfront about payments and rewards.
Card security: If you’re not confident that your crypto credit card is secure, you shouldn’t be using it in the first place. Crypto transactions generally cannot be reversed under any circumstances, so if your card is hacked or you lose your password, you’re usually on your own.
If your credit card is linked to an exchange or a specific type of wallet, you should look into the security record of that exchange before making a final choice. It’s a good idea to determine if the exchange or wallet has been hacked before, if so, how much was stolen, and, perhaps most importantly, if the victims were fully or partially reimbursed for their losses.
Interest rates: Just like traditional credit cards, if you fail to pay back your full balance each month, your balance will be subject to interest rates, which can range from 10%-25%+. Like regular credit cards, crypto cards also have late fees, so you’ll want to be careful to choose cards with lower rates and lower fees, particularly if you plan to leave a larger balance on your card or may be forgetful with making your monthly payments.
Local currency conversion: We mentioned before that one of the major benefits of crypto credit cards and debit cards is their ability to convert (or borrow against) your crypto against local currencies. However, not all cards work in all countries, so this is an important factor to look into.
Supported digital assets: Another aspect we previously mentioned is the ability for crypto credit and debit cards to allow users to convert or borrow against a wide range of digital assets. Despite this, some cards may be limited in the assets that a borrower can use.
For instance, some cards allow a wide scope of cryptocurrencies, while others only permit Bitcoin. In some cases, different cryptocurrencies may trigger different (or higher fees), so this is something to look into, particularly if you hold a lot of altcoins in your wallet or exchange account.
Funding speed: For crypto debit cards, it’s important to find out how fast funds will be available. For example, some cards may take several days once assets have landed in your wallet before allowing you to convert them to fiat currency.
This is typically not as big of an issue for crypto credit cards, as you are generally borrowing against your crypto and paying back the balance later, instead of actually converting the cryptocurrency at the time of purchase.
App: If a crypto credit or debit card you’re considering doesn’t have an easy-to-use app, you may want to look elsewhere. Quality crypto credit or debit card apps allow users to quickly track their transactions, account balance, rewards, fees, and interest rates. An app can also permit you to freeze your account if you believe it has been hacked or stolen, or if you have lost your physical card.
Some of the best and most popular crypto credit cards on the market today include:
The BlockFi Visa Card is one of the most popular crypto credit cards on the market today, and for good reasons. It offers relatively generous rewards, a transparent interest rate structure, a high level of availability, and is backed by two well-known and trusted brands.
Some of the major features of the BlockFi Visa card include:
The Gemini Credit Card is currently in the pre-launch phase, but it has a strong potential to be one of the most popular crypto credit cards on the market. The Gemini Credit Card is backed by Mastercard, giving it a high degree of credibility.
Some of the major features of the Gemini Credit Card include:
The Venmo Credit Card is more like a traditional credit card than the other options on this list, but also provides generous crypto rewards.
The Upgrade Bitcoin Rewards card is another great option, particularly for those who want to increase their holdings in Bitcoin. It’s also available for users with medium to fair credit, unlike some of the other cards on this list.
The SoFi Credit Card is backed by Mastercard, and allows users to pay back any of their SoFi personal or student loans with the rewards, place funds in a SoFi cash account, or, most importantly, place rewards in a SoFi invest crypto account.
The Brex Card, which is issued by Mastercard, is specifically designed for startups and provides optional crypto rewards through a user’s Coinbase account
Some of the best and most popular crypto debit cards on the market today include:
The Coinbase Visa card is currently in the waitlist stage but is slated to become one most popular crypto debit cards on the market today. The card is specifically designed to let users spend their assets in their Coinbase accounts, including U.S. dollars and allows them to earn rewards for each and every purchase.
The Bitpay Debit Card, which is backed by Mastercard, is another popular crypto debit card option. One of the main benefits of the card is the fact that it allows instant crypto reloads without conversion fees, though small exchange fees are still charged. The main drawback of the card is that it doesn’t currently offer a rewards structure.
The BlockCard, which is supported by Visa, offers the benefit of having no exchange, deposit, or withdrawal fees. Unlike some other cards, however, it does require users to stake Tenio tokens to get rewards, which could be a turn-off for some users.
The Crypto.com debit card, which is supported by Visa, offers integration with 90+ cryptocurrencies. Like the BlockCard mentioned above, the Crypto.com debit card also requires you to stake tokens, in this case, Crypto.com’s CRO tokens, in order to buy a card. The more you stake, the more rewards you can gain via the program.
The most popular option is the $400 Ruby Steel card, which offers 2% back on every purchase. It also offers a 100% rebate on a yearly Spotify subscription as well as waiving all ATM withdrawal fees for up to $400 per month.
For those who want to spend even less, the Midnight Blue card may also be a good option, as it offers 1% cashback and waives ATM fees for up to $200 of withdrawals per month.
Binance’s debit card is among the most impressive on this list, as it offers 8% cashback on purchases, but it’s among the least practical for ordinary customers. It should be noted that the card is only available in Europe, and is not available in the U.K., as Binance has been banned there. However, this card is really only available for wealthy customers, as it requires users to hold at least 600 Binance Coins (BNB), which, as of January 2022, was approximately $230,000.
We’ve reviewed a lot of credit and debit cards in this article, but it should be noted that getting a crypto credit or debit card isn’t for everyone. In many cases, the exchange transaction fees and additional card transaction fees could eat into your rewards, meaning that, if you aren’t careful, you could end up gaining little to no net profit. In that case, you could be better off using a traditional credit card with a good rewards program.
Plus, the cards with the highest rewards often require users to stake an absurdly high amount of a specific token, which is extremely risky and shouldn’t be done with money that you can’t afford to lose.
In general, crypto credit cards are only ideal if they offer more benefits than a similar non-crypto credit card, as a customer can simply utilize any savings they get from their traditional rewards card to purchase crypto on their own time. In addition, any benefits a card offers should be extremely transparent and easy to understand.
In the case of crypto debit cards, they’re often only ideal for users who hold a significant amount of their liquid assets in crypto and want to spend those assets with as little friction as possible.
It should be noted that both crypto credit and debit cards are a relatively new phenomenon, and, as the market becomes more competitive and new players emerge, reward levels and transparency may increase. That could make these cards a better choice for average crypto enthusiasts and not just crypto obsessives.
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