If used wisely, credit cards are regarded as a convenient way to make payments and shop. What about cryptocurrencies as a form of payment? The new kid on the block awards users with bitcoins, just like its traditional counterparts. They are, however, a little more difficult.
What Is Crypto Credit Card?
A crypto credit card allows users to spend cryptocurrency while also rewarding them with cryptocurrency. In the crypto realm, there are also debit cards. A crypto credit card, unlike a crypto debit card, allows you to borrow money from the issuer and pay it back later. It’s not dissimilar to how a typical credit card works. The main distinction is that you must also repay in cryptocurrency. If there are any incentives, they will be distributed in cryptocurrencies such as Bitcoin.
Cryptocurrencies are digital currencies that have grown in popularity over the last few years. Bitcoin, which debuted in 2009, is the most well-known, although there are over 4,000 alternative currencies available. These digital currencies can be spent in the same way that a US dollar can, but they can also be invested in. Cryptocurrencies are incredibly volatile, and they don’t always have the same safeguards as cash.
There are currently no crypto rewards credit cards available in the United States. A few, however, will debut later this year. As cryptocurrency becomes more widely used, we may expect to see more of it.
Read Also: 5 Best Crypto Credit Card in 2022
How Does A Crypto Reward Credit Card Work?
Crypto credit cards function in the same way as any other rewards credit card on the market: you are rewarded as you use the card. However, in this scenario, you will receive cryptocurrency in exchange for your purchases. Keep in mind, though, that each card processes and awards cryptocurrency differently to its cardholders.
The BlockFi Rewards Visa Signature Credit Card, for example, provides cardholders with the following benefits:
- On all qualified purchases, you’ll get 1.5 percent back in cryptocurrency.
- In the first 90 days of card membership, you’ll get 3.5 percent back in cryptocurrency rewards.
- On all qualified purchases, you’ll get 2% back in cryptocurrency. more than $50,000 in annual spending.
However, because you may carry thousands of bitcoins, the card pays you with BlockFi Cryptocurrency Rewards Points.
BlockFi will enable you to change the points into the cryptocurrency of your choice once the points are deposited and the cardholder account is in good standing.
Instead of waiting for your monthly statement to come, the Gemini Credit Card deposits bitcoin straight into your Gemini account every time you swipe your card, providing you immediate access to your rewards.
So, while you’re looking into crypto credit cards, be sure to look into how cardholders are rewarded. It may take an extra step or two compared to more typical credit cards, but if you’re interested in bitcoin investing, it might be worth it.
Also, keep in mind that not all of these are credit cards; numerous debit cards, such as the Coinbase and Crypto.com debit cards, are available. So, if you don’t like using credit cards, you don’t have to miss out on purchases that will add to your cryptocurrency portfolio.
However, keep in mind that the crypto cards are still credit cards, and the amounts must be paid off each month to avoid paying interest or late fees. While most transactions and card payments are made in US dollars, some cards allow you to make purchases (and pay off your card) using cryptocurrencies from your connected account.
Benefits Of Crypto Credit Card
1. It’s A Simple Way To Get Started:
Credit cards that offer cryptocurrency as a reward is usually linked to a cryptocurrency exchange, where you can buy bitcoin, ether, and a variety of other digital currencies. To perform crypto purchases and sells, you don’t need to use a distinct currency exchange. It’s a less time-consuming way to get your toe in the water. And, unlike with an exchange, if you acquire crypto as a credit card reward, you might not have to pay a commission on the transaction, albeit this depends on the card.
2. Lottery Ticket High:
It’s a chance to gain a lot of value for a small amount of money, similar to buying a lottery ticket. Part of the enjoyment is fantasizing about what you could purchase with the money, even if you realize your odds of becoming wealthy are slim to none. It could be aspirational, such as thinking about utilizing a fair quantity of airline miles to purchase a first-class seat to an exotic location worth thousands of dollars.
3. Appreciation:
After you receive a cryptocurrency incentive, it has the potential to appreciate. Cash returned, on the other hand, is unlikely to increase in value. If you buy something with credit card points and then resell it, the item will most likely lose value. You can’t resale an airline ticket or a hotel room purchased using miles or points for a profit. As a result, bitcoin is one of the few incentives with the potential to appreciate.
4. Passive Investing:
You might debate whether buying cryptocurrency is truly investing, but utilizing a cryptocurrency credit card is a convenient method to save money without having to think about it.
Things To Consider With Crypto Credit Card
Because obtaining a crypto card is more complicated than obtaining a standard credit card, there are a few things to consider before applying:
1. Taxes:
One of the best features of a crypto card is the chance to earn rewards that have the potential to increase in value, whereas cashback and travel incentives are likely to lose value owing to inflation and devaluation. These benefits, on the other hand, are not taxed, whereas if you earn cryptocurrency, it is treated as an asset and is taxable if you decide to sell it. If you want to earn or sell a significant quantity of cryptocurrencies, you should seek advice from a tax professional.
2. Flexibility:
Each cryptocurrency card has a unique portfolio of cryptocurrencies in which you can earn rewards. If you wish to invest in a specific coin, make sure to check whether the card, as well as the exchange that accepts it, will allow you to do so.
3. Perks:
Because many crypto cards have limited benefits, if you’re a frequent traveller, you might find more value in a travel rewards credit card. If you’re looking to save money on your monthly purchases, a cashback credit card can be a better option.
4. Limitations:
Limitations: Not every crypto card is available to everyone due to various legislation across the country. So, before you apply, double-check the terms and restrictions of each card to verify if you live in an eligible state. Furthermore, if you manage your cryptocurrency account outside of the United States, you risk breaking international laws, thus the crypto incentives you receive should be handled in the United States.
Conclusion
There are only a few different types of credit card rewards, but cryptocurrency is now one of them. It’s a fascinating development in the credit card market, but like with practically every other financial decision you make, make sure that crypto rewards make sense for you.
Also, keep in mind that, even if the incentives are possibly increasing in value, it’s critical to always spend sensibly. Overspending on a credit card might result in high-interest charges, which is never a smart decision.
