Crypto debit cards are relatively new in the market. Thus starters might find it tricky to use their crypto through a crypto debit card. However, with the growing crypto adoption, crypto debit cards will come in handy.
But before signing up, it’s crucial to educate yourself about these cards.
A crypto debit card is similar to a traditional debit. Like a traditional debit card, It has engraved numbers and an embedded microchip. You can use these cards for your in-person and online purchases.
Despite the many similarities between these debit cards, there is one major difference. While traditional cards use money from a bank account, crypto debit cards are funded through crypto.
The issuance of crypto debit cards is mostly by crypto exchanges. The debit cards in this category include Crypto.com, Binance, Coinbase, and Gemini. Other issuers are payment processors like Bitpay and membership clubs like Club Swan.
As stated above, you fund your crypto debit card directly from your crypto wallet. Usually, you do this through an app or a portal made available by your card issuer.
When you make payments to a merchant with a crypto debit, they receive it as fiat currency. The process of converting crypto to fiat is usually complex. And the process varies from debit card to debit card.
In most cases, crypto debit cards only allow manual conversion. So before you spend your crypto, you’ll have to convert them to fiat by selling your coins through the portal or app. It is only after you’ve successfully sold the crypto coins that you can top up your debit card.
However, if you find this a lot of hassle, you can choose a card that automates the process. So whenever you use the card, you automatically trigger the conversion of crypto to fiat.
Generally, crypto debit cards convert crypto in three different ways. These ways are:Also read: Top 7 Work Operating Systems of 2021
This is the most common way of funding crypto cards. Firstly, you’ll need to sell your crypto for fiat in the exchange platform. The crypto is converted to fiat at the prevailing market price.
Afterward, the fiat is sent to your platform account. You can then fund your crypto debit card from this amount. A crypto debit card that uses this process is the Club Swan card.
Here the cryptocurrency is first converted to stablecoin. A stablecoin is a digital token linked to a stable external asset, mostly the U.S. dollar. Afterward, you can convert the stablecoin for fiat by selling it and eventually funding your card.
One example of this card is the crypto.com card. With a Crypto.com card, you can sell your Ethereum for USDC. Then you can transfer these tokens to your crypto wallet and eventually sell them on the crypto.com exchange platform. You can then top up your debit with this fiat.
Unlike regular crypto, stablecoins protect the value of your coin from crypto volatility.
Some cards only allow you to convert crypto directly to stablecoins manually. After this conversion, the system then handles the rest.
At this point, you might think your payment happens in the stablecoin, but in reality, it’s fiat, mainly the U.S dollar.
The Coinbase card. Allows you to convert your crypto to USD coin (USDC). This coin is pegged at a ratio of 1:1 to the U.S dollar. Eventually, the USDC gets converted to fiat.
A crypto debit card is absolutely a long-term product. Therefore, before signing up, ensure you weigh their pros and cons cautiously.
When it comes to using your crypto for day-to-day purchases, convenience is something to strive for. Recently, using crypto for your daily expenses was nearly impossible. However, thanks to these cards, you can now use your crypto in millions of places around the globe.
Even better, some card issuers have partnered with processing companies to ease the usage of these cards. Thanks to these companies, you can make direct deposits and ATM withdrawals almost anywhere.Also read: 10 Best Android Development Tools that Every Developer should know
Most crypto debit cards offer rewards to cardholders. Also, these rewards vary from one debit card to the other.
While regular cards offer miles, points, and cash back as rewards, crypto cards offer cashback and other rewards.
For instance, Crypto.com offers cash back rewards of 2% to 8% of your purchases, depending on the card type. Additionally, if you’re a holder of top-tier cards, you can enjoy some exclusive benefits. These benefits include a free subscription to Amazon Prime, Spotify, and Netflix.
Other cards like the Club Swan reward holders if they refer family and friends. So when you refer a person, you get to earn 20% of the paid joining fee. The joining fee varies with the membership types-Stater, Premier, VIP, and Chairman.
Once the referring process is complete, this amount is directly credited to your account.
Security is something to strive for when it comes to digital payment methods. Due to this, most card issuers ensure your card have top-notch security measures for safety.
Some of these security measures are two-factor authentication, passcodes, and biometrics. So if you lose your debit cards, you get guaranteed security for your crypto.
Also, if you misplace or lose your card, you can lock it remotely from a portal or app. In addition, you can change its pin or even report the loss on the same portal or app.
The flexibility of these debit cards allows you to make purchases with the currency of your choice. So if you are a travel and crypto enthusiast, you can make purchases around the globe without issues.
Also, if your card supports MasterCard or Visa, you avoid the hassle of foreign exchanges when you travel. Additionally, most debit cards supporting Bitcoin support other payment methods. These payment methods are Google Pay, Apple Pay, and Samsung Pay.
Unlike regular cards, currency conversions and foreign transactions don’t affect Crypto debit cards. Also, unlike fiat, crypto isn’t easily manipulated, even by economic instability.
Although most debit cards charge no deposit fee, other numerous fees might turn you off. These fees include physical card, inactivity, and other maintenance fees.
For example, by using any crypto besides USDC with a Coinbase card, you get charged 2.49% as a transaction fee.
The IRS considers crypto as capital assets similar to bonds and stocks. Therefore, your crypto is subject to taxation in case of any capital gains.
Rewards from regular cards aren’t subject to taxation. But, the unclear thing is whether rewards from crypto cards are subject to taxation.Also read: 50+ Trending Alternatives To Quadpay | A List of Apps Like Quadpay No Credit Check/Bills and Payment
Most crypto debit cards are not internationally acceptable as they claim to be. This mostly goes to debit cards in partnership with Visa and MasterCard.
Also, although you expect rewards when you make purchases, it might not happen in some instances. For instance, Crypto.com cards don’t reward graphic designs and library payments.
All in all, all debit cards are undoubtedly convenient. However, consider weighing your options before applying for your crypto debit card.
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