Crypto credit cards are a new type of rewards card being offered by many popular crypto brokers and exchanges.
If you want to start investing in cryptocurrency -- or add to your current investments -- a crypto credit card may make sense for you. Keep reading to learn more about how crypto credit cards work and what rewards they may offer.
What is a crypto credit card?
A crypto credit card is a rewards credit card that lets you earn cryptocurrency rewards on purchases instead of cash back or points. They function the same way as a normal credit card: You get a line of credit from the bank that you use to make purchases, then pay them off at the end of the billing cycle. The only difference is the type of rewards you earn.
Crypto credit cards are generally cobranded credit cards. This means they are issued by a bank but marketed by a brand, such as an investment company or crypto exchange.
Ready to get a crypto credit card? See our list of the best crypto credit cards to get started.
How does a crypto rewards credit card work?
A cryptocurrency rewards credit card is used to make purchases like any other rewards card. However, you don't earn cash back or travel rewards. Instead, the rewards you earn are automatically used to purchase crypto that is deposited into your connected crypto account. The type of crypto you earn will depend on the card you have and which crypto you select. Each crypto credit card has a set list of available cryptocurrencies. Some common crypto rewards currencies include:
How much crypto you get varies based on the rewards rate and the market value of the coin at the time of the transaction. Like regular rewards cards, many crypto cards earn a flat rate on purchases, plus bonus rewards on purchases in certain categories.
For example, say you have a card that earns 3% back in crypto rewards on gas, and your chosen crypto is Bitcoin. If you make a $100 gas station purchase with your card, you'll earn $3 worth of Bitcoin based on the price of Bitcoin at the time the transaction posts. There are no exchange fees to turn your rewards into cryptocurrency with a crypto credit card.
Crypto credit vs. debit card
Crypto debit cards are similar to ordinary debit cards, and most operate on one of the major card networks (Visa, Mastercard, etc.). Some cryptocurrency exchanges and wallets provide them as a way to spend your crypto at merchants that wouldn't otherwise accept crypto payments.
When you use a crypto debit card, the funds will be drawn from your crypto wallet or crypto investment account and automatically converted to the merchant's currency. As with regular debit cards, you'll need to have adequate crypto available in your account to make a purchase.
In contrast, crypto credit cards don't spend your current crypto. Instead, they operate on a credit line in your local currency, just like regular credit cards. As such, you're essentially borrowing money from the card issuer which you then pay back when your bill is due. They're called crypto credit cards because they earn crypto rewards, not because they use crypto to make purchases.
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Should I get a crypto credit card?
Crypto rewards cards are best suited to people who already have a strong interest in cryptocurrency investing. That's because crypto is much more complex than regular credit card rewards (yes, even credit card points). For one thing, most cryptocurrencies are very volatile, meaning their value isn't very stable. Unlike cash back, the crypto you earn could lose significant value from one day to the next.
There are also tax complications inherent in crypto that don't typically apply to other types of credit card rewards. Specifically, cryptocurrency is considered to be an asset by the IRS. As such, you can wind up with a tax bill if you decide to sell your crypto, even if you earned it through credit card rewards.
Additionally, don't forget about the potential opportunity cost of using a crypto rewards card. Most crypto credit cards have fairly low rewards rates compared to the top rewards credit cards on the market. You may be missing out on rewards by going with a crypto card with a lower rate. If you really want to invest in crypto with your credit card rewards, you could simply cash out your rewards from an ordinary rewards credit card and use the proceeds to invest in crypto. If one of the best credit cards pays a higher cash back rate on your everyday expenses, that may make more sense.
Ready for a crypto credit card? Check out our guide to the best crypto credit cards.
