Understanding Crypto Cards: Are They A Good Idea?

Understanding Crypto Cards: Are They A Good Idea?
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Point Editorial

Cryptocurrency is gaining traction worldwide, and new products emerge almost daily to keep up with the trend.

The latest player on the field is the crypto card. 

But how exactly do crypto cards work? And what’s the difference between crypto debit cards and crypto credit cards? 

If you’re feeling a bit lost, we’ve got you covered. Keep reading to learn everything you need to know.

Long story short of cryptocurrencies

You’ve probably heard of Bitcoin. 

First released as open-source software in 2009 by an anonymous individual (or group of individuals) using the pseudonym Satoshi Nakamoto, Bitcoin (BTC) was the first decentralized cryptocurrency.

A cryptocurrency is a tradable digital asset built on an open, distributed online ledger known as a blockchain. Blockchain technology records transactions between two parties in a verifiable and permanent way, thereby guaranteeing the integrity of the trade. The name “cryptocurrency” comes from blockchain’s use of encryption to authenticate and protect transactions. 

When Bitcoin first entered the market, it was essentially worthless. One year later, it was only worth about 0.0008 USD. But by 2021, Bitcoin value had reached $50,000 per coin.

With Bitcoin’s meteoric rise, competing cryptocurrencies (or altcoins) have emerged, hoping to profit from crypto’s rising popularity. As of early 2021, there were an estimated 4,000+ cryptocurrencies worldwide. The most popular include Ethereum, Litecoin, Cardano, Polkadot, and Dogecoin.

If you’re wondering how to buy Bitcoin with a credit card, it’s definitely possible. Different companies have streamlined the process by moving away from previous payment methods like PayPal. 

What is a crypto card?

Until recently, if you wanted to cash out your holdings in bitcoin or another cryptocurrency, you had to convert your coins to a fiat currency (e.g., USD) and wait for your funds to appear in your bank account. 

That process took time, so most people tended to hold their crypto until it reached a particular market value, like holding onto stocks or shares of a fund until the time is right to sell.

Enter crypto debit cards (or crypto cards for short). These new tools allow cryptocurrency holders to spend their cryptocurrency balance directly without waiting for the money to convert and appear in their traditional bank account.

How do they work?

Crypto cards automatically convert the cryptocurrencies held in a crypto wallet into whatever fiat currency is needed to make online and in-store purchases from merchants that don’t accept cryptocurrencies. You can also use them to withdraw cash from ATMs in whatever currencies the card supports.

What are the main differences with a regular card? 

While crypto debit cards aren’t the same as regular credit and debit cards, the differences are relatively minor.

Crypto debit cards are like prepaid debit cards, except you fund your account with cryptocurrency rather than cash. You won’t have a bill to pay at the end of the month because you loaded the card with funds before using it. It also means you don’t have to go through your regular bank account to use your card.

How do I get a crypto card? 

To get a crypto card, you must create a digital wallet with the provider of your choice. Some crypto cards are automatically connected to their own wallets, while others allow you to connect your card to a pre-existing wallet.

After creating your wallet, you’ll have to buy some bitcoin or other cryptocurrency from a crypto exchange to fund your account. Once you have funds in your account, you can request your card. Some companies offer physical and digital versions of the card to assist with safe online purchases.

Some cards also require you to buy a certain amount of their proprietary currency to use their platform. You might also have to validate your identity using the Know Your Customer (KYC) verification process.

Where can I use it?

Many crypto cards are associated with Visa or Mastercard, so you can use them online or in-store wherever those cards are accepted. You can also withdraw cash at any ATM that supports those brands.

However, some cards are more limited in their applications, so read the fine print before signing up.

Pros and cons of crypto cards

Crypto debit cards are new financial products and come with many advantages and disadvantages.

Here’s a breakdown of some of the pros and cons of using a crypto card:

Pros

  • You can spend cryptocurrency quickly and easily with retailers that don’t usually accept it.
  • Many cards support multiple types of currency.
  • Robust security features protect your account.
  • Some cards offer cryptocurrency cash-back rewards on transactions.

Cons

  • High risk — volatility means the value of cryptocurrency is much less stable than cash.
  • Many cards charge monthly fees or fees on conversions, transactions, and ATM withdrawals.
  • Not all cards are accepted in all areas.
  • Taxes — every time you convert crypto, it includes a capital gains tax.

Comparing crypto cards

Competition has exploded since the first crypto cards hit the market, so you have many options to choose from.

When shopping for a crypto card, look for one with low fees, a well-designed app, multiple currency support, and robust security features. Make sure the card you pick offers services in your area. 

Many cards also offer attractive perks, cash-back rewards, and partnerships with streaming services like Netflix and Spotify. 

The following table compares some of the most popular crypto cards in the U.S.:

Company Fees Cryptocurrencies supported Rewards Availability
Coinbase 2.49% cryptocurrency liquidation fee 9 4% Anywhere Visa is accepted
BlockCard $5 monthly fee $3 ATM withdrawal
$2 foreign transaction fee
13 1% to 6% cashback U.S. only
BlockFi None 1 3.5% cashback for the first 90 days
1.5% after
Anywhere Visa is accepted
BitPay 3% foreign transaction fee $2.50 ATM withdrawal fee 6 None U.S. only
Crypto.com None 90 8% cashback Anywhere Visa is accepted

Crypto rewards cards

In addition to crypto debit cards, a new product has emerged called the crypto rewards credit card — or simply, a crypto credit card.

Crypto credit cards are like regular credit cards with rewards or cash-back plans. You can use a crypto rewards card to make purchases just like any other type of credit card, and the money you spend is charged to a credit account. You receive a bill every month, and you have to pay the full balance or else you’ll be charged interest on the balance owed.

The only difference is that you earn cryptocurrency instead of receiving traditional rewards like airline miles or cash-back. Crypto rewards credit cards are touted as a method to begin investing in crypto without using your own money or consolidating your earnings if you already have crypto holdings.

Some of the best crypto rewards credit cards and bitcoin credit cards are the BlockFi Rewards Visa Signature Credit Card, the Gemini Credit Card, the SoFi Credit Card, and the Upgrade Bitcoins Reward Card.

The bottom line

There’s no doubt that cryptocurrency is shaking up global money markets. What was once a mere curiosity is now a legitimate competitor to traditional centralized currencies. 

But if you’re thinking of getting on the cryptocurrency bandwagon by getting a crypto debit card or crypto rewards credit card, remember that these products are still relatively new and aren’t yet integrated worldwide.

Cryptocurrency is one among many available financial products. Before buying cryptocurrency or getting a crypto rewards card, make sure that you’ve developed a healthy financial lifestyle and that you have a balanced budget.

In the meantime, if you’re looking for an alternative to crypto cards, why not try PointCard™?

A transparent, easy-to-use alternative payment card, PointCard allows you to spend your own money while also receiving exclusive benefits, including unlimited cash-back on all purchases and bonus cash-back on subscriptions, food delivery, rideshare services, and coffee shop purchases.  

You also get fraud protection with zero liability, no interest rates, and rental car and phone insurance.

Join Point now.

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