Bitcoin might not be the best way to make purchases, but it can still be part of your spending strategy thanks to a growing number of crypto credit cards.
Crypto-friendly investment platforms like SoFi and BlockFi, as well as cryptocurrency exchanges like Gemini, all implement such credit card options. Like many traditional reward cards, these cards receive a percentage of the return on their regular purchases. But instead of points and miles, risky investors receive rewards that can be redeemed for certain cryptocurrencies.
We already love credit cards from traditional credit card issuers like Chase and American Express, which can help you maximize your cashback or get free travel (if you settle your balance in full and on time). These companies offer credit cards to any type of user – whether you’re building your credit history from scratch or looking for world-class travel perks and benefits. To take advantage of the new crypto reward card options, swap guaranteed returns in the form of travel points or cashback on (cash )for crypto that may not be returned with same value , but these cards can be useful tools for the right type of spender.
Here’s what the experts are saying about the value of crypto credit card rewards and how to decide if they are right for you.
How Do Crypto Credit Card Rewards Work?
Credit cards tied to your investments are unparalleled – the Fidelity Rewards Visa Signature card, for (example), offers 2 (payments for) every purchase when you deposit your earnings into an eligible Fidelity investment account.
Crypto reward cards work in a similar way. You use the card to debit every purchase you would normally make with a credit card and receive a certain percentage in return. Like typical rewards cards, some earn a linear rate on every purchase, while others offer bonus rewards in certain categories, like dining or groceries.
Because these cards work like any other reward card, they also carry the risk of high-interest debt if you fail to pay the balance in full when your monthly bill is due. They carry the same variable interest rates as other credit cards, anywhere between about 10% and more than 20% APR. Crypto rewards can offer potential value over time, but they can also be quickly wiped out by any interest-bearing balances at those high rates.
The main difference between a crypto reward credit card and other reward cards is in the redemption process. Instead of cash refunds or account credits, you get that percentage back in crypto if, for example, you spend $ 1,000 per month on a card if you get crypto rewards of $ 2, you can potentially redeem these rewards in Bitcoin for $ 20. Since these cards are co-branded with a cryptocurrency exchange or investment platform, your crypto will usually be deposited into your associated account.
Drawbacks of Crypto Rewards Credit Cards
Crypto rewards can be a valuable way to add to your holdings once you’ve decided to take the risk and invest in Bitcoin or some other type of crypto. Since this is “free” money, you may find a less risky option than investing your money in crypto, but there are still opportunity costs.
“You are giving up on a sure thing,” said Beverly Harzog, credit card expert and consumer finance analyst for U.S. News and World Report. Crypto is a speculative asset, as opposed to the fixed value of cashback or the relatively standard surrender value of credit card points. It’s true that the value of your crypto credit card rewards could increase over time, like any crypto investment — but it is not a guarantee in such a way that your points and miles or cash back ratings will match more traditional credit card options.
Even the Fidelity card, while still investment-based, can deliver a higher guaranteed return, says Ted Rossman, senior industry analyst at CreditCards.com (like NextAdvisor, CreditCards.com is a part of Red Ventures).t CreditCards.com (like NextAdvisor, CreditCards.com is owned by Red Ventures). “That card gives you 2% back that you could put in an S&P 500 index fund. . Your rewards are probably safer to take advantage of, ”says Rossman.
Another potential limitation is the types of cryptocurrencies that you can redeem rewards for. While some cards offer their crypto option, some only offer Bitcoin rewards.,,missing line
If you want to use this as a way to explore other altcoins, your options may be limited.
Why Would You Choose a Crypto Rewards Card Over Other Rewards?
However, these cards have advantages. Rossman compares investing in cryptocurrencies through these cards to “gambling with house money”.
“That’s more appealing to me than putting my “own” money on it, “says Rossman. “At the end of the day it’s like it’s your own money, you could use that cashback to (balance) your balance, or you could use travel rewards (use to plan a trip), but framing is important to me”. The potential benefitt of a higher reward, however, remains enticing.
However, it is also important to cover your financial priorities before opening a new credit card or investing money in a speculative investment such as cryptocurrency. Make sure you have saved money in an emergency fund, pay off any existing high-yield debt you owe, and add to a conventional investment retirement account as 401 (k) before buying cryptocurrencies, either with rewards or your “own” cash.
If you’re sure you have money to spare, there are a few more reasons these cards can add value, especially if you already have crypto (and if that crypto is on the same platform that issues your reward credit card):
Fees: You can always get cash back with a traditional Rewards credit card and then use your rewards to buy more crypto yourself, but by earning crypto rewards directly you can bypass some of the trading fees that exchanges place on US currency conversion.
Security: Crypto Reward Cards are issued in collaboration with issuing banks and established networks such as Visa and Mastercard, making your purchases as safe and widely accepted as any other traditional credit card.
Timing: Even after you’ve made an initial investment yourself, rewards can be a useful way to practice averaging the dollar cost of crypto, especially if you opt for a card that will redeem your rewards regularly or automatically after purchase.
Which Credit Cards Offer Crypto Rewards?
BlockFi Rewards Visa Signature Credit Card
BlockFi recently announced that it will start offering users at the top of the waiting list launched in late 2020 and offering rewards comparable to flat cashback cards:
- 1.5% back in Bitcoin on every purchase
- 3.5% back in Bitcoin for the first 90 days after account opening
- After spending at least $ 50,000 per year, the rewards increase to 2% of Bitcoin with every purchase.
- Rewards are automatically redeemed monthly and transferred to your BlockFi interest account, where you can earn additional interest
- No annual fee, no international transaction fees
- 14.99%-24.99% variable APR
It’s also a Visa Signature card, which means it offers additional perks like access to Visa’s Luxury Hotel Collection, car rental savings, travel and purchase protection, and more. When applying for the BlockFi card, be sure to read the cardholder agreement for the specific Visa Signature benefits it offers.
Gemini Credit Card
The Gemini credit card has yet to be approved for apps, but the exchange plans to launch the card in the summer of 2021, with waiting list members getting early access. Unlike BlockFi’s flat rewards, the Gemini Crypto Rewards Card offers tiered savings:
- 3% back on dining, 2% back on groceries, and 1% back on everything else
- You can redeem your rewards for Bitcoin or choose any cryptocurrency available on Gemini (including Altcoins known as Ethereum or Bitcoin Cash).
- Rewards are automatically credited to your Gemini account upon purchase so you can start investing immediately. If you have an interest-earning Gemini Earn account, you can have your rewards deposited there too.
- No annual fee
As the card is not currently available, there is no information as of yet on other fees and conditions that will apply. The Gemini Credit Card is a global Mastercard so you can enjoy additional benefits such as savings with partners like DoorDash and Lyft, price protection and more.
SoFi Credit Card
SoFi launched its SoFi credit card in 2020 as a flat cash back card with the option to redeem rewards on an eligible SoFi account, including SoFi student or personal loans, SoFi Money Cash account or SoFi Invest accounts. (Option to invest rewards in crypto through your crypto account at SoFi Invest:)
- 2 points per dollar (equivalent to 2% back) with every purchase if you redeem the rewards in an eligible SoFi account (including as cryptocurrency in your SoFi Invest crypto account)
- 500 reward points (worth 5 USD) are required to redeem rewards as crypto
- Cryptocurrency exchanges limited to Bitcoin and Ethereum
- No annual fee or international transaction fees
- 12.99%-24.99% variable APR
- After 12 (one-time )monthly payments of at least the minimum amount owed, SoFi will reduce your APR by 1%
The SoFi credit card is a global Mastercard and it offers additional benefits such as discounts with partner brands (including Lyft, DoorDash and ShopRunner), cell phone protection, travel and (shopping )protection and more.
Upgrade Bitcoin Rewards Card
Upgrade recently launched its Bitcoin reward card offering, which is open to use and, like other crypto reward options, is similar to flat cashback reward offers:
- 1.5% Bitcoin Rewards Earning When You Pay For Your Purchases (Not When Purchasing)
- Bitcoin will be redeemed within 12 billing periods after your payment is received
- There is not much you can do with your Bitcoin rewards other than keep or sell them in your upgrade account. There is no way to transfer your Bitcoin to another wallet, and there is a 90-day retention period after redemption before you are eligible to sell.
- Once you sell your Bitcoin holdings, there is a 1.5% transaction fee and you can only receive the money from the sale as a credit on your bank statement.
- No annual fee and no foreign transaction fees
- 8.99%-29.99% APR — if you carry a balance, the Upgrade Card works more like an installment loan; you’ll pay off equal monthly installments over a fixed period
The upgrade card offers the least amount of flexibility when it comes to Bitcoin rewards, and the other cards on this list are likely better options for making money and investing. If your goal is simply to own Bitcoin as a store of value before finally selling it, then you can with this card, but you cannot store your coins in your own wallet or exchange them for other cryptocurrencies.
Crypto Debit Cards and Prepaid Debit Cards
Crypto credit cards require you to forego essentially free cash on traditional reward cards, but using one is inherently not a bad financial decision as long as you practice good credit habits.
Crypto debit cards, on the other hand, can be much riskier. These cards often earn rewards for your expenses, like crypto reward credit cards. The difference is in how you spend. Crypto debit cards allow you to pay for goods and services using the converted value of your cryptocurrency holdings in fiat currency (e.g. US dollars).
Since cryptocurrencies are very volatile and their price values fluctuate constantly, they are not a good option to spend, especially for long-term investors.
In addition to being a warning sign, volatility has additional tax implications: the credit card rewards you earn for spending, be it in the form of points, cashback, or bitcoin, count as reimbursement, he says they are not taxed. when you earn them (although you will pay capital gains tax on crypto rewards when you convert them back to US dollars). But every time you withdraw your crypto holdings to be spent on a debit card, it is a taxable event.
For example, Coinbase’s (unpublished )debit card offering allows you to spend any balance in your Coinbase wallet (while earning rewards), and Coinbase automatically converts your crypto to US dollars when you make a purchase. Conversions and report any gain or loss on the value of your crypto to report on your tax returns. Depending on the card, you may also be charged fees for your conversions or transactions.
“I think if you’re into crypto primarily, it’s because you think it will go up over time,” says Rossman. “I don’t really see cryptocurrency as a currency in the sense that we’ll use it to buy our daily coffee … I tend to see it more as an investment. It’s like not selling stocks or bonds. ” , or gold to buy lunch or something.
Should You Get a Crypto Rewards Credit Card?
If you’re looking for a way to get into crypto because you don’t want to risk your own money, cryptocurrency may not be the best investment option for you, but these cards can be a relatively low-risk way to test the waters, Harzog says. For Crypto Enthusiasts Those who’ve already taken the risk can be a solid way to bolster your portfolio, provided you’re willing to forego the cash (other )reward cards provide for your expenses.
Just think about the opportunity cost of the cashback or the travel rewards you give up. While you should in no way rely on credit card rewards as part of your monthly budget, you should make sure that you are at least standing on a solid foundation that these cashback rewards are not better used elsewhere.” says Rossman.” Or, you know, maybe you are sacrificing the chance to get a free ride”.
There are also the usual risks of credit cards in general: if you already have credit card debt or are having trouble paying your balance every month, a new reward credit card won’t help. Be sure to practice good credit habits with these cards – pay off your balances in full and on time each month, or you end up paying more interest than you make in crypto rewards.
“You just have to decide: what should your portfolio look like?” asks Harzog. “And I don’t just think about your investments, but also about what you have in your wallet. What credit cards do you have?
Rossman says these cards are more appealing in many ways to experienced users who are already customers of an exchange trying to centralize rewards where they have already been invested, and the companies themselves will likely look at the cards with a long-term perspective Strategy, which may be suitable for long-term HODLers.
“None of them really have the flashy sign-up bonuses,” says Rossman, which reassures him. “They are not looking for the short-term, spontaneous gamer. I think they’re either looking for someone who’s already a cryptocurrency fan who just wants more, or someone who thinks they want to give it a try. ”
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