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Are crypto credit cards worth it?
Personal Finance
Table of Contents:

The rise of the crypto credit and debit card is here and there’s no turning back. According to Visa, crypto-linked card usage hit $2.5 billion in Q1 of 2022. This raises ample questions, the main ones being, should you get in on the crypto credit card craze and is it worth it? 

If you are an avid crypto enthusiast, you may be wondering if you can continue to reduce your reliance on traditional finance such as Robinhood and Charles Schwab with a crypto credit card. Let’s discuss some background on how crypto credit and debit cards work, so you can decide if you should open one up.

How Do Crypto Credit/Debit Cards Work?

In the early days of cryptocurrency, crypto users who wanted to use their digital assets to pay for goods and services would have to convert them manually to fiat through third-party platforms and exchanges. This cumbersome process relies on exchanges and ACH transfers that take multiple business days and are a hassle for crypto users. Additionally, these transfers can be prohibitively expensive as more transactions means more fees. Crypto credit and debit cards are the crypto world’s first attempt to solve this problem. 

Crypto credit and debit cards are essentially credit and debit cards that allow you to pay for goods and services by making it easier to convert your crypto to fiat. These cards work more like cashback reward cards, but instead of earning a percentage of your purchase back in fiat, you can earn the equivalent amount in crypto, such as Bitcoin and Ether. These cards typically do not let you pay off your balance with your digital asset holdings or crypto wallet. 

One of the earliest attempts at this was the Coinbase Shift card, which worked by deducting the value of the purchase from the user’s Bitcoin balance. The card was launched in the fourth quarter of 2015 and deducted the funds directly from the Coinbase user’s account based on the spot price of the cryptocurrency in real time. The card had a few issues and unfortunately ceased operations in April 2019. 

The crypto world often uses the term crypto credit card interchangeably for both crypto credit and debit cards. However, there is a stark difference between the two types of cards.

Differences Between Crypto Credit and Debit Cards

The crypto industry has been hyping up many crypto credit cards, when in reality many of these cards are actually debit cards. When you use a crypto debit card, the funds are drawn from your wallet or account. Many crypto debit cards are prepaid, which requires users to load money onto the card before being able to use it. 

With crypto credit cards, you are taking out a loan with the card issuer that you pay back either at the end of the month or over time. Crypto charge cards charge no interest on payments, but require that users pay the statement balance in full at the end of the month. Both types of cards convert crypto into fiat to pay either the loan off or for the goods outright.

How You Settle Your Bills

One of the main concerns that avid crypto users have around crypto credit and debit cards is that when you are settling your bills, you are not actually spending crypto. You have to settle your debt with fiat, such as $USD. That means you have to either put up real cash to pay the bill each month or sell crypto to do so—which is not in your control.

Examples of Crypto Credit/Debit Cards

The number of crypto credit and debit cards on the market is expanding month after month. Here are a few of the most common crypto credit and debit cards that crypto users have embraced:

Crypto Debit Cards

  • Crypto.com: up to 8% back in crypto, depending on the amount of CRO tokens staked
  • Coinbase: up to 4% in crypto rewards, including 1% back in Bitcoin and 4% back in XLM
  • Binance: up to 8% BNB Rewards, depending on your BNB Monthly Average Balance
  • OnJuno: 1.20% Bonus Rate, $100 Bonus, 10% Cashback on 5 selected merchants with USDC
  • Ledger: open a line of credit to get cash to spend on the card, using cryptocurrency as collateral, with rates starting at 0%

Crypto Credit Cards

  • Gemini: 3% back in crypto on dining purchases (on up to $6,000 in annual spend, then 1%), 2% on groceries, and 1% on all other purchases
  • BlockFi: 1.5% cashback, 3.5% cashback in the first 90 days
  • Now that you have a better grasp on the crypto card world, let’s get into some of the finer details on the pros and cons of crypto cards.

Is a Crypto Credit or Debit Card Right For Me?

Choosing to open a crypto credit or debit card is a financial decision that can affect your ability to build wealth and embrace Decentralized Finance (DeFi). The point of DeFi is to move away from traditional financial institutions. Some crypto cards ensure that you continue to operate in the traditional financial system. Here are a few factors you should consider when deciding to open a crypto credit or debit card.

You May Need to Hold Crypto

Credit card companies do not expect you to purchase their assets in order to open up a credit card. However, this is not the case with some crypto cards. Some of these cards require a minimum amount of staked assets to use the card. For example, with the Royal Indigo and Jade Green Crypto.com card you have to hold $4000 of Crypto.com Coin (CRO) for at least 180 days after opening the account. This is no small amount of capital holdings that you cannot put in another asset that you would rather hold or simply spend that capital. 

Crypto card users may also be missing on yield. If you are required to stake a certain amount of coins, you may not have the additional capital to invest in the assets you want to. These holdings can prevent you from taking advantage of yield farming. Yield farming is the process of lending or staking your cryptocurrency coins or tokens to earn yield in the form of transaction fees or interest. To avoid situations like this, you should read the fine print and understand exactly what benefits you receive and what stipulations the card has.

You Can Earn Awesome Rewards Earning Rewards

Similar to regular credit cards, many people sign up for crypto cards for the rewards. A number of crypto cards have great rewards that differ from typical credit cards. Many cards offer cashback and/olr crypto back when making purchases. For some cards, the offer for cashback is as high as 8%. 

Non-crypto credit cards also offer both cashback and airline rewards and points. For example, Southwest’s Chase Rapid Rewards offers Southwest points that users can cash in for flights. If you are enjoying the rewards from your non-crypto credit cards, then you have to give them up in order to move to a crypto credit or debit card. You may be earning rewards in a less valuable way with crypto cards. 

Crypto users should be aware that these rewards may be dependent on the amount of coins you stake. Nevertheless, it could still be worth it for some crypto users. The Obsidian card from Crypto.com offers 8% CRO rewards, free Amazon prime, Spotify and Netflix subscriptions—but you have to stake $400,000 worth of CRO to receive those rewards. If you have the capital to spare, then you can take advantage of the high rewards that you cannot get with normal credit cards.

Crypto Cards May Not Be Available in Your Country

Avid cryptocurrency enthusiasts are taking advantage of the rewards of crypto cards—but only if they live in certain countries. Crypto cards are only available in select countries and territories. Many crypto users who are living outside of North America and Europe cannot access many of the most widely used crypto cards. For example, the BlockFi card is only available in the United States. This lack of availability is the opposite goal of DeFi.

Your Card Is Accepted (Almost) Everywhere

Some crypto users may be hesitant that they could open a card and not be able to use it at their preferred vendors. Visa and Mastercard back many of the main crypto cards. And even though many crypto users want to get away from big financial institutions, such as these credit card giants, their backing means that crypto cards will be accepted at most vendors. However, you will not be paying vendors directly in crypto. For the most part, you will be paying vendors with fiat.

Fees & Conversion Costs

Many of these crypto cards advertise that they have no fees or low fees. However, many of these cards do have hidden fees—and they’re high. For example, most crypto cards charge a conversion fee to convert crypto to $USD or other currencies. These fees can quickly add up and eat into your yield. In fact, some crypto cards charge conversion fees as high as 2.5%. The potential fees don’t end there. Some crypto cards also charge annual fees. Additionally, some cards have a prohibitive monthly withdrawal limit.

Crypto pricing is another potential concern for avid crypto users. Many of these crypto card companies offer free trading but have lower crypto prices as compared to other exchanges. For example, if you go to OnJuno or Coinbase and attempt to buy an asset, the price is actually around $20 more than what the asset is actually trading at. This business practice is meant to undercut the card holders' cryptocurrency value.

Limited Selection of Crypto Rewards

Crypto users want decentralization and complete control over their finances. Crypto credit and debit cards lock users into using a handful of cryptocurrencies. Only a handful of crypto cards offer a wide range of cryptocurrencies. Thus, avid crypto users may not be able to get the crypto back that they want. This adds an additional layer of navigation for active crypto users.

Trigger Taxable Events

When you sell crypto to settle your card and pay for goods and services, there is a chance you may have to pay taxes. That means every time you swipe a crypto debit card for something as simple as buying a cup of coffee, you trigger the possibility of capital gains tax. This is not ideal for anyone, as the goal is to minimize these events. 

On the flip side, there is also the chance that using your crypto debit card can result in a capital loss—which would result in tax write-offs. A tax write-off may sound good at first, but all these potential taxable events can make your life more complicated during tax season. Crypto users will have to individually calculate the gains and losses for each transaction, which can quickly add up to hours and hours of work.

Crypto cards can be a good solution for some crypto users, especially if you can stack rewards. However, the downsides of crypto credit and debit cards may not work for all crypto users. If you are looking for a better solution, join the Spritz waitlist. Spritz is the de facto solution for the user who wants to embrace DeFi. You will be among the first to pay your credit cards with crypto and take more control over your finances. 

Spritz allows you to continue using whatever credit card you already have. With Spritz you can keep maximizing your rewards and yields from the credit cards and DeFi platforms you use most, while paying off your monthly expenses and bills automatically with your crypto earnings.

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