Aiming to bridge the gap between cryptocurrency and traditional finance, crypto credit and debit cards offer various advantages. Here's everything you need to know about them.
According to CoinMarketCap, the value of all available cryptocurrencies at the time of writing is no less than $2 trillion. Many crypto holders even believe that digital currency marks the new beginning of the significant shift from the traditional structure of global finance to a completely decentralized one. Yet, despite being very popular, cryptocurrency is still relatively uncommon in global transactions. You might still find it hard to pay your coffee or phone bills with Bitcoin. To solve the issue, we're starting to see new products being offered by various companies that might change the dynamic of cryptocurrency and make it more acceptable to the world. Among them are crypto debit cards and credit cards.
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Understanding Crypto Credit Cards
Essentially, crypto credit cards work exactly like regular credit cards, so they allow users to be rewarded as they spend on the card. The big difference is that instead of miles or cashback, crypto credit cards will reward you with cryptocurrency like Bitcoin. Keep in mind that each card differs in how they process and give the rewards to the cardholders.
Here are some providers of crypto credit cards that you can use:
BlockFi Credit Card
BlockFi has launched its very own crypto credit card that comes with several rewards for cardholders. For instance, the card will earn 1.5% cashback in cryptocurrency for every purchase made. In addition to that, BlockFi gives out other bonuses, such as 3.5% cashback of up to $100 in Bitcoin for all purchases made in the first 90 days after card activation and 2% cashback on all eligible purchases over $50,000 annual spend.
You can also get $30 for every client referral in the Refer-a-Friend program. However, note that the rewards don't immediately come in cryptocurrency. You will get rewarded with Reward Points instead, which you can convert into the cryptocurrency of your choice by the end of each month. This includes Bitcoin, Ether, Litecoin, and more.
For now, the card is only available to US residents and not eligible for business accounts. You will have to sign up for a BlockFi account before applying for a credit card. Once the card is activated and ready to go, you can basically use it in any merchant that accepts Visa. There are no annual fees nor foreign transaction fees.
Gemini Credit Card
Gemini Credit Card is another option that offers even more cryptocurrency as a reward. The card offers 3% cashback on dining, 2% on groceries, and 1% on all other purchases with no annual fee. The rewards come in crypto coins, which you can exchange on the Gemini platform in real-time with no exchange fees. The crypto is not limited to Bitcoin, but also Ethereum and some other smaller coins.
The ability to earn cryptocurrency instead of cashback that can be converted into cryptocurrencies is a pretty huge advantage of choosing Gemini. The rewards are also given in real-time, so you're able to earn the coin soon after you made the purchase.
Understanding Crypto Debit Cards
Similar to conventional debit cards, crypto debit cards allow you to electronically make payments and complete day-to-day transactions in various merchants. When you buy something with a crypto debit card, the merchant receives the payment in a fiat currency like US dollar.
Oftentimes, you won't have to worry about whether the merchant would accept your card or not because many products have been released in conjunction with Visa and Mastercard, so it can be used practically anywhere right now. This makes cryptocurrency a more accessible form of payment in the physical world.
While regular debit cards are connected to bank accounts, crypto debit cards are funded by a crypto wallet. In this case, how your cryptocurrencies are converted into fiat should depend on the card. Some let you keep the money in crypto form until you make a purchase, while others would require you to convert in advance.
Basically, what you do is top up your crypto debit card with the cryptocurrency of your choice, either through a mobile app or online exchange. Then, you can hit the shops. When you swipe the card, the card issuer would take the dollar amount of crypto needed for the purchase. The merchant will then receive the payment in the form of regular fiat currencies.
Using crypto debit cards might offer some bonuses that you won't find in regular debit cards. For instance, crypto debit cards usually offer rewards every time you spend with the card. Keep in mind that you might have to hold or stake a certain amount of crypto to be eligible for rewards. Other than that, you can also avoid high exchange rates when you're traveling abroad.
Even if you don't travel that much, you can enjoy the convenience of no annual membership fees and make payments online or offline transactions rather easily.
Here are some of the best crypto debit cards to choose from:
Coinbase Debit Card
Coinbase debit card offers an easy way to spend your cryptocurrency in almost any merchant worldwide. The card is connected to your Coinbase crypto wallet, so it's very convenient to use and able to process transactions instantly. You can switch between Bitcoin, Ethereum, and more in only a few seconds. Additionally, you can track your spending through the Coinbase app and withdraw money from the nearest ATM.
When it comes to rewards, Coinbase lets the cardholder choose to either get 1% cashback (in ETH, DOGE, BTC, or DAI) or 4% cashback (in GRT, XLM, AMP, or RLY). The card is currently available to all US residents. Coinbase crypto debit card is very convenient to use because it automatically converts the cryptocurrency on demand, so you won't have to keep a fiat currency balance in your account. Last but not least, Coinbase offers great security that includes two-factor authentication, instant card freeze, mobile wallet app, and more.
Binance Debit Card
As one of the best crypto exchanges in the US, Binance is also one of the top choices for crypto debit cards. For a start, the card offers impressive cashback of up to 8% for eligible purchases, making it probably the best option for cashback. There are no monthly fees and the provider only charges up to a 0.9% transaction fee for transactions and ATM withdrawals.
The card currently supports 30 cryptocurrencies including Bitcoin and Ethereum. Similar to Coinbase, Binance also holds cryptocurrency in your wallet and only converts it into fiat when needed. The card can be used in any merchant that accepts Visa. However, keep in mind that Binance crypto debit card requires users to have a balance of at least 600 Binance Coins or BNB and only reward them with BNB as well.
What to Weigh on Crypto Debit and Credit Cards
Having a crypto credit or debit card might be a bit more complicated compared to regular payment cards. Here are the things you should consider before using one:
Flexibility and Restrictions
Each card supports different numbers of cryptocurrencies. This can be pretty crucial when it comes to earning rewards and depositing. If you're going to use a crypto card, make sure it supports the cryptocurrency that you invest in so that it allows you to use your balance for payments.
You should also note that the service might not be available in all places. Before applying, make sure the card is available in your country and see if it's in compliance with the regulations in your country. Some countries like China, Turkey, and India ban cryptocurrency altogether so it might not be possible to use the card there. Always read the terms and conditions before deciding to use the service.
Benefits and Rewards
As explained before, each crypto card has a different bonus and reward mechanism. For example, through their website, Gemini credit card stated that they offer bigger cashback for groceries and dining but a relatively small one for regular purchases. In this case, the card would be beneficial for those who like to buy groceries, but not so much for those who prefer to use it for other purchases. Therefore, check the requirements for each card and see which one suits you the most.
Taxes
The Internal Revenue Service (IRS) actually considered cryptocurrency as capital assets similar to bonds and stocks. Therefore, you need to report your capital gains or losses when using crypto cards to make purchases. The amount of tax that you should pay depends on the period you have held the coins as well as the profit amount. It's best to consult with a tax professional for guidance in this matter.
Conclusion
Finally, now we're able to spend our cryptocurrency pretty easily with the help of crypto debit and credit cards. These cards mark a new beginning that bridges virtual currency and traditional finance, simply making crypto more acceptable in the real world. Generally speaking, you can even replace your regular cards with these crypto cards, but that would mean that you should convert all of your money to cryptocurrency.
While using crypto cards can be a huge advantage to many crypto holders, there are also some drawbacks that need to be acknowledged. For instance, the price of Bitcoin is highly volatile, thus, the amount of fiat currency in your crypto wallet might change depending on the Bitcoin exchange rate.
This is why it's important to frequently check the price that day to make sure your crypto is enough for the purchase. Other than that, you might have to pay taxable gains and losses. Therefore, it's important to be careful and really educate yourself beforehand. Make sure that the card you're considering is worth the fees and other requirements.
In addition to being used as a debit and credit card, cryptocurrency payments also come in many forms. One of them is as a payment in several brokers.