Are Crypto Rewards Credit Cards A Good Idea?

by Toni Perkins-Southam

Forbes Advisor

Friday April 16, 2021

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Stock image  (Source:Getty Images)

Crypto rewards credit cards are the newest incentive-style payment option meant to reward users via the ability to earn cryptocurrencies. In fact, crypto rewards credit cards are so new that there are none actually available on the market at the moment, although several are scheduled to be released sometime in 2021.

These cards can be great for varying degrees of crypto enthusiasts — from the crypto curious person who is finally ready to dabble in cryptocurrency but does not have the risk tolerance to jump in the market, to those deep into crypto — the ones who have a strong belief in the longevity of the digital currency movement and its potential for growth and profit.


Introduction and A Short History

Cryptocurrencies haven't been around for too long, but their short history has not hindered them from making some monumental achievements.

Earlier forms of electronic money emerged in the late 1980s, but it wasn't until 2009 that a truly decentralized cryptocurrency, known as Bitcoin, hit the market. Considered to be the pioneer of the movement, Bitcoin was introduced by an anonymous individual or group of individuals, no one really knows, using the pseudonym Satoshi Nakamora. When Bitcoin first entered the market, it was valued at basically nothing. That's right — it was essentially worthless when applying a fiat value to it. By 2010, it was worth roughly 0.0008 USD. In February 2021, Bitcoin value topped $50,000 per coin.

As Bitcoin grew in popularity, loads of other cryptocurrencies emerged — estimated at over 4,000 as of early 2021. Users now have more options than ever when it comes to cryptocurrencies.


Crypto Rewards Credit Cards

Crypto rewards credit cards are the newest tool popping up in the field of digital currencies and so far their rewards incentives look pretty enticing, and even more so if cryptocurrencies continue to gain value at the rapid rate they are gaining today. But what exactly are crypto rewards credit cards?

Although on the surface they sound confusing, crypto rewards credit cards are really no different than most traditional rewards credit cards. Just like the majority of credit cards in circulation, the transfers are facilitated through the world's largest payment processing networks: Visa or Mastercard. So if your crypto rewards card is issued by Visa, your card will be accepted everywhere Visa credit cards are accepted.

Depending on their processing network, Crypto rewards cards can also be eligible with the benefits and card protections offered by Visa or Mastercard, but as of now, those specific benefits have not yet been released to the public.

The next similarity lies in how to actually use crypto rewards cards for purchases. Just like traditional credit cards, crypto credit card holders will be issued a line of credit depending on their creditworthiness. These funds can then be used to make purchases in USD. When you spend, you will be responsible for paying back what you borrowed and potentially charged interest on purchases if they are not paid back before your billing cycle ends.

Lastly, each time you spend with your crypto rewards credit card, you will be eligible to earn rewards. While some credit cards offer airline miles or cash back, crypto credit cards reward you with Bitcion and other cryptocurrencies.


What is a Crypto Debit Card

The rise in cryptocurrency popularity has simultaneously created a need for crypto holders to be able to quickly access their funds for spending. Up until recently, the only options for cryptocurrency owners was to either invest and hold long term (HODL) or speculatively trade. In order to cash out their crypto to fiat currency for day-to-day spending, holders need to convert their coins to a fiat currency and then wait for their funds to hit their bank account. This is a slow and inefficient way to access funds.

To meet this need, crypto debit cards began popping up on the market. Their launch revolutionized the movement, helping to drive interest and, ultimately, public adoption. Although we have all seen the growth of cryptocurrency, the inability to spend it in a real world setting made it more of a "Monopoly" type of money for many.

Crypto rewards debit cards can be used at merchants just like a standard debit card is used, but instead of being backed by a bank account, it is backed by your own crypto wallet. Think of it as more of a prepaid debit card than a traditional debit card.

First, the cryptocurrency is converted into the user's choice of fiat currency before being loaded to the debit card. Once loaded and ready to use, purchases are processed in that specific currency. Rewards, however, are given as a specific digital coin depending on the debit card.

Many of these crypto debit cards also earn rewards in the form of cryptocurrencies on day-to-day spending. Some cards can even offer pretty lucrative rewards, depending on how you value digital currencies.

Crypto debit cards, similar to crypto credit cards and other traditional payment options run on the major payment processing networks like Visa and Mastercard. If your crypto rewards debit card is issued by Visa, the card will work anywhere Visa is accepted. You can even withdraw cash from ATMs worldwide with crypto debit cards.


Crypto Rewards Credit Cards vs. Crypto Rewards Debit and Prepaid Debit Cards

Despite running on major processing networks and having the ability to earn rewards in the form of cryptocurrencies, crypto rewards credit cards are actually quite a bit different than the prepaid debit options available.

The main difference is that with crypto credit cards, cardmembers make purchases on credit via the credit line allowed by the issuing institution and are responsible for paying back the balance. Crypto debit cards involve the user using their own funds — if they don't have the money, they can't use their card.

One pitfall of the crypto prepaid debit cards when compared to crypto rewards credit cards is that they generally earn rewards in a bank specified crypto, which is usually significantly less valuable than some of the more popular cryptos like Bitcoin and Ethereum.

The Crypto.com Rewards Visa card*, for example, touts up to 8% back on all purchases but the reality is not quite as exciting. It earns that 8% back in the form of CRO rewards, Crypto.com's own coin token, which are valued around just 0.08 USD. A $100 purchase would earn 8 CRO, but once converted to USD, it's actually closer to $6.40. Still, a 6% cashback card on purchases is a great deal, but with the volatile crypto market, if the coin trends downward, that percentage can dip significantly.

Another essential difference is the proof of stake obligation of many prepaid debit cards. Proof of stake, in its most basic form, is when a crypto holder contributes some of their digital coins to a specific blockchain network in order to support said network. Some debit cards require proof of stake as a term of card membership.

These requirements can be quite significant and tying up your money with the issuing financial institution may not be worth the opportunity cost. Rewards may not compensate for the loss incurred from tying up your capital.


Comparing Crypto Credit Cards

BlockFi Visa

The world's first actual crypto credit card isn't available quite yet, but should be on the market and available to U.S. residents sometime in 2021. The BlockFi Visa credit card is unique in that it is one of the only rewards cards that earns Bitcoin cashback, which is currently the most valuable and sought after cryptocurrency.

The BlockFi Visa credit card's welcome offer of $250 after spending $3,000 in the first 3 months of membership is a pretty standard offer compared to similar traditional credit cards on the market. It comes with a $200 annual fee. Purchases earn 1.5% back in cryptocurrencies and will be deposited into your account each month. More details have yet to be released.

If you want to snag a BlockFi Visa when it becomes available, make sure to get on the waitlist.

Gemini Credit Card

The Gemini Credit Card, like the BlockFi Visa, has the ability to earn rewards in the form of Bitcoin and other cryptocurrencies. Cardholders use USD to make purchases but can earn rewards in cryptocurrencies.

Gemini's new card details are somewhat vague, but we do know that it will earn up to 3% back on purchases. It will also offer zero exchange fees on crypto rewards and will be available in all 50 states of the U.S.

Scheduled to be released sometime in 2021, you can hop on the waitlist for the Gemini card now.

Crypto.com Rewards Visa

The Crypto.com Rewards Visa card is a prepaid debit card that includes 5 different "flavors," each with its own unique set of perks and benefits. These tier levels are determined by how much you "stake," or essentially loan, the crypto card issuing institution. The lowest tier requires no staking, but the rewards are minimal. The highest tier requires a 5,000,000 CRO, the digital token of Crypto.com, staking requirement. 5,000,000 CRO rewards is equivalent to $400,000 USD, making the highest tier out of reach for all but a very limited group of Crypto investors.

Crypto.com Rewards Visa's mid-tier cards seem to be the most logical as the staking requirements are less egregious, yet the benefits are still enticing. Perks include free Amazon Prime, Spotify monthly subscriptions, Netflix, airport lounge access and more.

Bottom Line

No doubt, cryptocurrencies are here to stay, but are they the way of the future? How you feel about this question could very well decide if a cryptocurrency rewards credit card is right for you. More established crypto enthusiasts may find that crypto rewards credit cards as a great addition to their wallet and offer help growing these digital assets. However, given the relatively low risk of crypto rewards credit cards, they may appeal to those wanting to finally take their first steps into the world of crypto.


NOTE: The information on these credit cards has been collected independently by Forbes. The card details in this article have not been reviewed or provided by the respective issuers of the cards.