The most recent credit card trend is Crypto Rewards. Are they, nevertheless, a good idea?
It may still be a part of your spending plan due to the growing number of crypto-rewards credit cards.
After Mastercard announced a new partnership with digital asset platform Bakkt, crypto-friendly investment platforms like SoFi and BlockFi, as well as cryptocurrency exchanges like Gemini, are all rolling out credit cards. Crypto rewards may soon be an option for loyalty programmes on more traditional rewards credit cards. As a result, rather than earning points and miles, more risk-taking investors may soon be able to receive incentives redeemable for specific cryptocurrencies.
Traditional credit card issuers like Chase and American Express already provide credit cards that can help you optimise cash back or get free trips (when you pay your balances in full and on time). These organisations provide credit cards for almost any sort of customer, whether you’re trying to establish credit or want to take advantage of premium travel perks and privileges. You’ll swap assured returns in the form of travel points or cash back for bitcoin that may or may not return the same value to take advantage of new crypto rewards card alternatives. On the other hand, these cards may be excellent tools for the proper kind of spender.
How Do Crypto Credit Card Rewards Work?
The Fidelity Rewards Visa Signature Card, for example, gives you 2% back on every transaction when you deposit your profits into an appropriate Fidelity investing account.
Cryptocurrency reward cards function in a similar way. You may charge any purchase you’d ordinarily make with a credit card to the card and get a percentage back. Some earn a flat rate on every transaction, similar to traditional rewards cards, while others give additional points in certain areas, such as dining or shopping.
Because these cards function similarly to other rewards cards, you run the danger of incurring high-interest debt if you don’t pay off your balance in full when your monthly bill is due.
They have the same variable interest rates as conventional credit cards, which normally range from roughly 10% to upwards of 20% APR. While crypto awards have the potential to grow in value over time, any balances that earn interest at these high rates can swiftly wipe them out.
The redemption procedure is where a crypto rewards credit card differs from regular rewards cards. You’ll get that % back in bitcoin rather than cash or statement credits. For example, if you spend $1,000 a month on a card that offers 2% back in crypto rewards, you may be able to exchange those credits for $20 in Bitcoin. Your cryptocurrency is often placed into your connected account because these cards are co-branded with a crypto exchange or investment platform.
Drawbacks of Crypto Rewards Credit Cards
If you’ve decided to take the risk and invest in Bitcoin or another sort of cryptocurrency, crypto rewards might be a great way to add to your holdings. You could think of it as a less dangerous alternative than putting your own money into crypto because it’s “free” money. There is, however, an opportunity cost.
“You’re giving up a guaranteed thing, says Beverly Harzog, a U.S. News and World Report credit card specialist and consumer finance analyst. Unlike the fixed value of cash back or the relatively normal redemption value of credit card points, cryptocurrency is a speculative asset. It’s true that the value of your crypto credit card rewards might rise over time—just like any crypto investment—but it’s not guaranteed in the same way that the value of your points, miles, or cash back with more traditional credit card alternatives is.
According to Ted Rossman, senior industry analyst at CreditCards.com, the Fidelity card, while still based on investments, can provide a more certain return (like NextAdvisor, CreditCards.com is owned by Red Ventures).
“That card offers 2% cash back, which you could put toward an S&P 500 index fund.””You know, getting upside from your incentives is certainly a safer bet,” Rossman adds.
Why Would You Choose a Crypto Rewards Card Over Other Rewards?
However, there are certain advantages to these cards. According to Rossman, crypto investment with these cards is akin to “playing with home money.”
“That appeals to me more than investing my ‘own’ money in it,” adds Rossman.
Fees: You can always use a standard rewards credit card to receive cash back and then use that money to buy additional bitcoin.
Security: Crypto rewards cards are issued in collaboration with issuing banks and on well-known networks like as Visa and Mastercard, ensuring that your purchases are just as safe and widely recognised as those made with a standard credit card.
Which Credit Cards Offer Crypto Rewards?
BlockFi Rewards Visa Signature Credit Card
It provides similar benefits as flat cash back cards:
Every purchase earns you 1.5 percent of the cryptocurrency you purchase.
For the first 90 days following account opening, you’ll get 3.5 percent back in crypto rewards (limited at $100 in bitcoin earned).
After spending at least $50,000 each year, you’ll get 2% back in cryptocurrency on every purchase.
Monthly, your rewards redeemed and sent to your BlockFi Interest Account, where you may earn even more interest.
There is no yearly charge, and there are no international transaction fees.
The annual percentage rate (APR) ranges from 14.99 percent to 24.99 percent.
It’s also a Visa Signature card, which grants you access to Visa’s Luxury Hotel Collection, rental car discounts, and more.
Gemini Credit Card
The Gemini credit card has not yet opened for applications, but the exchange claims it will do so in the summer of 2021, with waiting members receiving first dibs. Gemini’s crypto rewards card, unlike BlockFi’s flat rewards, provides tiers of savings:
Dining will receive a 3% discount, grocery will receive a 2% discount, and everything else will receive a 1% discount.
When you make a purchase, your rewards promptly placed into your Gemini account, allowing you to start investing right away. If you have a Gemini Earn account that earns interest. You may opt to have your rewards deposited there as well.
There is no yearly charge.
Because the card isn’t yet available, no details on additional fees or terms released. Because the Gemini Credit Card is a World Mastercard. It comes with extra perks like DoorDash and Lyft discounts, price safeguards, and more.
SoFi Credit Card
SoFi introduced the SoFi Credit Card as a flat cash back card with the opportunity to convert rewards into a qualifying SoFi account. Such as SoFi student or personal loans or SoFi Invest accounts.
It provided the opportunity to invest rewards in cryptocurrency through your SoFi Invest account in 2021:
To redeem prizes as cryptocurrency, you’ll need 500 reward points ($5 worth).There are no yearly fees or international transaction fees.
APR ranges from 12.99 percent to 24.99 percent.