What is crypto credit cards and how they work?
Today, cryptocurrency has become more popular than stocks among UK investors. After all, it has been a consistent topic of conversation in the financial world, and now, even the credit card industry wants to be a part of the buzz by rewarding customers with digital currencies.
The question now is: Should you get a crypto credit card? Read on to get your answer!
What is a Crypto Credit Card?
Basically, a crypto credit card uses an incentive-style payment method that gives users cryptocurrencies as rewards. Similar to traditional rewards credit cards, this card is also supported by the world’s largest payment processing networks, Visa and Mastercard, so you can use one anywhere in the world.
Aside from crypto enthusiasts, this innovation is perfect for those wanting to try out cryptocurrency but do not have the resources to jump in the market just yet. Moreover, since the value of cryptocurrencies continues to grow, the rewards are very tempting.
How Does it Work?
A crypto credit card works just like any other type of credit card. Use your card for your purchases, and you will be eligible to earn rewards. Instead of rebates or airline miles, your card will help you earn and redeem cryptocurrencies.
Come springtime this year, Visa and financial tech company BlockFi will release the Bitcoin Rewards Credit Card, the first-ever credit card to offer crypto rewards, to all US residents, except for those in New York. Cardholders will get a 1.5% cashback on all their purchases, which will then automatically be converted to Bitcoin and stored into a BlockFi account. The crypto funds can be spent, withdrawn, and traded as the users wish.
However, that reward does not come easily! This crypto rewards card also has its fair share of fees, and some of them might vary, since this is a very new development. With traditional cards, a guide to credit card fees by Petal points out that banks often charge account setup fees and annual fees, on top of fees for things like foreign transactions and late payments. These are paid on top of interest charged on the purchases you make with your credit card.
With crypto credit cards, the annual fees may be offset, but again, this depends on the company. With the Bitcoin Rewards Credit Card, users have to pay a $200 (£144) annual fee, but this can be waived for the first year if they earn $250 (£180) in bitcoin and spend a minimum of $3,000 (£2,160) in their first three months as a cardholder. But if you wish to expand your cryptocurrency portfolio, you can look at the deals from Tomo Credit Card, where users can choose among Bitcoin, Ethereum, and Litecoin, for their rewards and redeem them 28 days after paying the monthly dues in full. But apart from the membership and annual fees, be sure to check into the fees for redeeming cryptocurrency.
Should You Get One?
Crypto credit cards offer an easy way to get started on cryptocurrency, removing the hassle of currency exchanges and additional fees. This can be the start of your investments, as you stash away crypto without thinking too much about it. Over time, these rewards can rise in value, especially as the crypto market continues to grow. This advantage can not be applicable to other forms of credit card rewards like cash back or airline miles, which decline in value even if you try to resell them.
On the other hand, the rewards system is not exactly stable, with cryptocurrency being volatile. Also, you may lose control over when you make a purchase. Say, you were eyeing a crypto purchase, and it is presently valued high, but by the time you earned the rewards, the price has already dropped. As a result, you spent more but received less. Not to mention, while you can buy some products and services with your cryptocurrencies, these rewards are not spendable. You still have to convert these crypto rewards into dollars, so that you can spend them. Lastly, although Bitcoin rose to popularity as a decentralised system, you can never be too sure about its anonymity.
So, should you get a credit card? It’s entirely up to you — but remember that you still can choose between traditional or crypto credit cards. Evaluate your financial situation first, and do your research. Should you choose to get a crypto credit card, be sure to read the fine print and accept that risk is a part of your decision. But if you choose to stick with traditional credit cards, be reminded to spend wisely and always make your payments. In that way, you are also rewarding yourself in the long run.
Article written by Renee Joyce|
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AUTHOR BIO: Renee Joyce isan aspiring blogger and journalist with an interest in all crypto technology after becoming intrigued by the rise of Bitcoin in 2010. Today, she enjoys reading and writing content relating to the various trends in the world of crypto, and the technology’s increasing success. When she’s not following leads on the latest developments in blockchain technology, she loves to enjoy classic films from the Golden Age of Hollywood, and collects physical copies when she can. She also likes to write a great deal about the slow and steady decline of croquet, and she is passionately working hard to change the perception that the noble sport is merely for the elderly.