Crypto Credit Cards Are Attractive, But There Are Some Things You Need To Know First

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Crypto credit cards are becoming more mainstream, with several financial giants in the space, including Visa and Mastercard, teaming up with crypto companies to launch theirs. But although they have attractive attributes, there are several factors that customers need to consider before getting one.

Learn: What’s Next Big Cryptocurrency To Explode In 2021? Discover: Robinhood’s Competing Investment Platform Adds Crypto Trading Capabilities

In July for example, Visa launched an encrypted credit card with BlockFi. The card allows recipients to earn 1.5% in bitcoin on every purchase they make; a 3.5% bitcoin reward rate for the first 90 days; and they can also earn 2% in bitcoins on every dollar spent over $ 50,000 per year. For every transaction made by cardholders, they can earn bitcoin rewards. Once redeemed, the bitcoin rewards are transferred to the cardholder’s BlockFi Interest Account (BIA) where the rewards can generate crypto interest, which means even more bitcoin, according to a BlockFi spokesperson.

In the future, we also plan to allow cardholders to pay off their balances using Stablecoins, according to BlockFi.

Earlier this week, BlockFi said that within 90 days of launching the first credit card to offer Bitcoin as a reward to cardholders, credit card spending is currently heading to over $ 2 billion in spending. annualized based on growth projections, according to an announcement.

The rewards can be attractive, given the recent surge in Bitcoins and it is the best performing asset so far this year, beating both stocks and commodities.

More: As JPMorgan CEO Calls Bitcoin Worthless, Bank of America Says Digital Assets Are Too Big To Ignore

In August, BlockFi cardholders who received rewards at their 3.5% introductory rate got an effective rate of over 4.25%, while customers got the standard 1.5% refund. were gaining an effective rate of 1.8% due to the recent appreciation in the price of Bitcoin. With the introductory rewards rate of 3.5%, cardholders can earn an additional $ 100 in Bitcoin in their first three months. For comparison, if someone had earned $ 100 in Bitcoin in 2017, it would be worth over $ 4,000 in Bitcoin today.

The story continues

Rival Mastercard also announced the launch of a crypto card with Gemini. The card will allow cardholders to earn up to 3% on meals, 2% on groceries and 1% on other purchases, according to the Geminis website. The rewards will be in Bitcoin or any crypto on Gemini, and there will be no annual fee.

Gaurav Gollerkeri, general manager of payments at BlockFi, told GOBankingRates that crypto cards match people’s experience with traditional reward-based credit cards.

This has been a great addition to our retail product line for our current customers, but has also attracted new people who would not be classified as crypto-fluent. People know how to use a credit card and pay it off monthly, but were encouraging new behaviors with traditional products. It’s a new entry point for BlockFi to encourage greater talk around the exciting world of crypto, he said.

However, a differentiator from traditional cards using fiat currency is that cryptos are taxable.

More: 7 Best Credit Cards With Crypto Rewards In 2021

Shehan Chandrasekera, head of CPA tax strategy at CoinTracker.io, a platform that helps customers calculate taxes on cryptocurrencies, told GOBankingRates that the IRS treats cryptocurrencies as property. As a result, every time you spend your cryptocurrency to purchase a good or service, it creates a taxable event for you. You need to follow the cost base and the market value at the time of spending to determine the amount of your capital gain.

He added, however, that he saw people using them despite the tax burden, using tools like CoinTracker to easily track taxes.

Several experts have told CNBC that while the IRS is probably unlikely to come after you for a dime, it means that you are technically not following the law if you are making money for a dime when you buy one. coffee and fail. to track this as a earnings event.

Another differentiator concerns the rewards. Blockchain News reports that rewards on certain credit cards may be limited to the selection of cryptocurrency card issuers. The Tomo credit card, for example, only offers reward points in Bitcoin, Ethereum, and Litecoin. On the other hand, the Bitcoin Upgrade reward card exclusively offers Bitcoin rewards. Be sure to check out the range of cryptocurrency rewards a credit card offers before signing up for an account, he said.

See: What Is Crypto Mining And How It Works Find: 7 Best Ways To Start Investing With Little Money

In July, Visa said consumers spent more than $ 1 billion in crypto on goods and services through their encrypted cards in the first six months of the year. Visa powers both cards that allow consumers to easily convert crypto to fiat and spend it as well as cards that allow them to spend fiat and earn crypto as a reward, according to CoinDesk. It also has partnerships with Coinbase and Circle.

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Last updated: October 15, 2021

This article originally appeared on GOBankingRates.com: Crypto Credit Cards Are Attractive, But There Are Some Things You Need to Know First

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