Are Cryptocurrency Rewards Credit Cards A Good Idea?

Key takeaways

  • Crypto rewards playing cards supply a more moderen addition to the rewards currencies that embody factors, miles and money again: rewards that robotically convert to Bitcoin, Ethereum and different cryptocurrencies.
  • Not like the rewards of a standard bank card, the worth of your crypto rewards has the potential to rise in worth as coin values improve… or lower, if the development of plummeting coin values because the heyday of crypto continues.
  • Although these playing cards are a low-risk method to construct crypto cash, you might be higher off with a standard card that earns you extra profitable money again — after which make investments that money into crypto, should you like.

Bank card rewards traditionally fall below three varieties of rewards currencies — factors, miles or money again. However cryptocurrency is now a rewards forex, too, because of the launch of a number of rewards bank cards since 2021’s crypto heyday.

The rewards course of for these playing cards is pretty easy and works equally to a standard money again program. With most crypto playing cards, you earn a proportion of your purchases again in U.S. {dollars}, which you’ll be able to then use to purchase or add to your crypto stash, often robotically.

The preliminary attraction of crypto bank cards was the “excessive danger, excessive rewards” facet of crypto investing. For instance, cardholders within the midst of the crypto frenzy believed they might earn money again with a crypto bank card, transfer their rewards into an lively digital forex, after which develop their rewards haul exponentially as the worth of their crypto exploded.

However crypto winters since have resulted within the plummeting worth of many cryptocurrencies, with costs for even the most well-liked cash down significantly from all-time highs. The value of a single bitcoin, for instance, surged to $64,400 in November 2021 and stands at lower than $40,000 as of January 2024. Similar for the Bitcoin competitor Ethereum, which reached a excessive of $4,811.70 in November 2021 and now holds lower than half that worth at present.

The case for crypto rewards playing cards

After all, that’s not what individuals who go for crypto bank cards hope for. The advantage of crypto bank cards is that, not like different varieties of rewards currencies, the worth of crypto has the potential to extend. Not solely that, however people who find themselves fascinated about investing in crypto however don’t have the money to take action can start constructing their digital belongings by utilizing their card for normal spending and payments.

Whereas the cardboard is now not out there to new candidates, the Improve Bitcoin Rewards Visa® Credit score Card was an early crypto rewards card that earned cardholders 1.5 p.c money again, which transformed to Bitcoin as they paid off their purchases. It meant you might use the cardboard for $1,000 in spending and payments, repay your stability off and get $15 in Bitcoin deposited into your card’s rewards account. This card didn’t cost an annual price both, and curiosity fees didn’t apply since you by no means carried a stability from one month to the following.

Think about you bought this card and used it for $2,000 a month in common spending and payments over the course of a yr. Should you paid off the whole $24,000 in balances with every billing assertion and by no means carried debt from one month to the following, you might need earned $30 in Bitcoin every month — or $360 in Bitcoin over the 12 months.

With a daily rewards card, that $360 in money again wouldn’t have had the potential to develop in worth. However let’s say the worth of Bitcoin elevated 20 p.c over the yr you had the Improve card. In that case, your $360 rewards haul may very well be price $432. And if the worth of Bitcoin elevated 50 p.c, your rewards worth may very well be $540. That’s the attraction of crypto rewards playing cards.

The opposite facet of the crypto coin

After all, with all that’s occurred within the crypto world over the previous couple of years, among the many downsides of crypto bank cards is the worth of your cryptocurrency might additionally lower dramatically, inflicting your rewards worth to drop proper together with it.

Should you have been capable of earn rewards in Bitcoin on the time however didn’t spend them, for instance, your rewards may very well be price lower than half of their unique worth.

After all, the concept of investing bank card rewards to assist them develop isn’t new — playing cards that robotically make investments your money again within the inventory market have existed for years. Constancy, for instance, launched a bank card in 2016 that gives limitless 2 p.c money again when deposited into an eligible Constancy account, like a brokerage account or an IRA.

You can get potential upside with much less danger by doing one thing like shopping for an S&P 500 index fund together with your money again rewards or via playing cards supplied by the likes of Constancy and SoFi. However I nonetheless suppose crypto rewards playing cards attraction to a sure viewers.
— Ted Rossman, Bankrate Senior Credit score Card Trade Analyst

There’s additionally a cause to be leery of platform-specific cryptocurrency bank cards, since they don’t actually do something for you that you could’t do your self. For instance, you might as a substitute go for a money again bank card with the very best attainable fee, then redeem your rewards for money again and use the funds to purchase cryptocurrency your self. In that case, you might use any platform you wished to purchase your crypto, or you might even retailer it utilizing a chilly pockets that retains your data and personal crypto keys off the online.

And both method, you simply can’t beat the flexibility of a standard money again card. For some, the power to spend money again on something — whether or not that’s crypto, a grocery retailer journey or a splurge buy — is best than being locked into crypto, even when which means manually investing your earnings and paying the everyday USD-to-cryptocurrency conversion charges.

How a lot are you able to earn with a crypto rewards card?

We talked about how the now-unavailable Improve Bitcoin Rewards Visa supplied 1.5 p.c again in Bitcoin as you paid your purchases off with no annual price. Nonetheless, there are different crypto bank cards to think about.

For instance, the Gemini Credit score Card® enables you to earn 3 p.c again on eating, 2 p.c again on groceries and 1 p.c again on all different purchases. There’s no annual price for the Gemini Credit score Card, and you’ll decide to earn rewards in Bitcoin, Ethereum or every other cryptocurrencies presently out there on the Gemini platform.

Then there’s the Venmo Credit score Card, which provides 3 p.c again in your prime eligible spending class, 2 p.c again within the subsequent prime spending class and 1 p.c again on different purchases. The eight versatile spending classes that qualify for bonus rewards embody payments and utilities, eating and nightlife, leisure, gasoline, grocery purchases, well being and wonder, transportation and journey.

The Venmo Credit score Card doesn’t have an annual price, and rewards could be transformed into Bitcoin, Ethereum, Bitcoin Money or Litecoin.

The underside line

Solely you possibly can determine if a crypto bank card is a good suggestion, however it is best to examine the highest crypto playing cards to common money again bank cards earlier than making a decision. As a substitute of getting a crypto-specific card, you might all the time join a money again card that earns a flat 2 p.c again with no annual price, then make investments your rewards into any cryptocurrency you need with a platform of your selecting.

Additionally, know that the jury is out on whether or not crypto is on the rise or doomed to fail in the long term. Whether or not it is best to spend money on crypto is a bigger dialog, however if you’re optimistic about crypto’s future — and even simply crypto curious — these rewards playing cards supply a reasonably low-risk method to get some pores and skin within the sport.

*Details about the Improve Bitcoin Rewards Visa® Credit score Card, Gemini Credit score Card® and Venmo Credit score Card has been collected independently by Bankrate. Card particulars haven’t been reviewed or authorised by the cardboard issuer.

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