What you need to know about crypto credit cards in 2022

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

If you are an avid crypto enthusiast, you may be wondering if you can continue to reduce your reliance on traditional finance and go even more bankless than ever before 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:

What are Crypto Credit Cards?

Crypto credit cards are rewards credit cards that give you rewards in cryptocurrency instead of traditional credit card points that can be redeemed for things like travel or cashback in 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. 

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 their crypto 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. 

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.

Differences Between Crypto Credit and Debit Cards

users mustThe 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 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, similar to how you would load a Visa gift card or other pre-paid credit card.  

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 purchases, but users must pay the statement balance in full at the end of the month. Actual transactions are handled in fiat currency—including how you can pay your bill, but the perk is that you can earn rewards in cryptocurrency. 

Since crypto credit cards can’t be paid off with crypto, Spritz is the best way to pay credit cards with crypto, as well as other bills like your utilities, mortgage, or car payment.

Benefits of Crypto Credit Cards

Most credit cards provide users with some benefits. Crypto credit cards are no exception. Here are some of the most common benefits you’ll find with crypto credit cards:

• Cash Back: One of the most apparent benefits of crypto credit cards is that they offer you cash back. Well, technically, they offer you crypto back, but you receive funds back either way for simply making purchases. Moreover, depending on your credit score and what type of card you use, you may receive a higher percentage of your cash back. 
• Build Your Financial Portfolio: One of the top benefits of using crypto credit cards is that they allow you a quick, easy way to build your financial portfolio. Rather than investing in crypto directly, those who frequently use crypto credit cards can buy crypto with reward points. 
• Fewer Fees: Given the nature in which crypto is purchased, using crypto credit cards can allow you to purchase crypto without paying all of the fees associated with crypto trading; you may be able to skirt fees that are accessed when initiating the trade. 

Reducing Financial Risk: Lastly, many people are interested in investing in crypto, but many are reluctant due to the fact that it’s such a new and unpredictable asset. However, using a crypto credit card can allow you to try out crypt trading without actually putting your own money at risk.

Limitations and Considerations

Most credit cards also come with their share of drawbacks. Although there are a variety of benefits to using crypto credit cards, there are also some limitations to consider. Here are some of the most prominent:

• Tax Liability: One of the top limitations associated with crypto credit cards is tax liability. This is because the liability may not be clear to investors upfront. Either way, while you do not have to pay taxes on your earned crypt rewards themselves, you will likely have to pay taxes when you cash them in. If you are not aware, this may come as an unwelcome surprise when you cash in your crypto. Talk with a crypto tax specialist before you commit to anything to be sure that you know what responsibilities you’re taking on. 
• Value Loss: Another major limitation to consider is that of value loss. As with all investments, it is always possible to lose your entire investment without warning. Although it technically won’t affect your financial status, this can be a significant loss and disappointment for any investor.
• Variability: Additionally, not all crypto credit cards are created equal. Therefore, your chosen card may have higher or lower interest rates than others and may provide more or less cash back. 
• Availability: Since cryptocurrencies are fairly new to the financial world, certain cards may or may not be available in your area. This can be frustrating if you have your sights set on a certain credit card and later find out it’s unavailable. 
• Limited Benefits: Although crypto can be a great reward, it’s often more of a long-term investment than an immediate benefit. So, if you enjoy rewards cards that allow you to gain frequent flier miles or if you like to trade in your points for gift cards and merchandise, you may be disappointed with the benefits offered by crypto credit cards. ‍
• Limited Crypto: Lastly, crypto credit cards won’t necessarily allow you to invest in any cryptocurrency. Instead, they are far more likely to enable you to invest in only a select few coins or tokens. For instance, some of the most common crypto being used for credit card rewards are Gemini Dollar (GUSD), Litecoin (LTC), Dogecoin (DOGE), Bitcoin (BTC), and Ethereum (ETH). If you frequent other blockchain networks or want to diversify your crypto holdings, crypto rewards cards might not be the best choice.

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.

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.