The world of cryptocurrency is complicated to many people, but its popularity is only growing as companies begin to launch Bitcoin credit cards. These cards might be the right fit, but savvy users have many factors to consider before signing up for one.
How Do Bitcoin Credit Cards Work?
The premise behind a Bitcoin credit card may sound strange. After all, Bitcoin is highly volatile. However, as more people invest in Bitcoin, it makes sense for credit card companies to integrate them into their rewards systems. Essentially, these cards function the same as any other rewards card, but they have cryptocurrency redemptions. Like typical credit cards, the holder will be charged similar variable interest rates and have debt if they cannot pay their monthly balances.
Top Three Bitcoin Credit Cards
A year ago, Bitcoin credit cards were still a developing idea. The premise behind these cards is that they will function similarly to rewards credit cards. However, instead of getting cash back or flight miles, they receive Bitcoin. Because Bitcoin is so volatile, this is a drastically different kind of exchange. Before signing up for a Bitcoin card, one must join a cryptocurrency exchange for crypto transactions.
Currently, three massive companies with Bitcoin credit cards are BlockFi, Gemini, and SoFi Invest. BlockFi’s credit card would pay 1.5% cashback on purchases that the company will convert to Bitcoin. They charge a yearly $200 fee. In addition to this percentage, they are offering a sign-up bonus of $250 in Bitcoin if users spend $3,000 on their credit cards within the first three months.
Meanwhile, Gemini promises its customers will earn up to 3% in cryptocurrency on every purchase with no annual fee. They also do not charge exchange fees for transferring rewards to a digital wallet.
Lastly, SoFi Invest has an excellent Bitcoin credit card where users can earn 2% cashback on all purchases. According to the experts at SoFi Invest, a person can redeem points directly into cryptocurrency with their SoFi Invest active investment account.
Bitcoin Debit Cards
Bitcoin debit cards were developed before credit cards. Coinbase, Fold Card, and Cash Card are various types of Bitcoin debit cards. These are very different from cryptocurrency rewards credit cards. If someone wants to use a Bitcoin debit card, they must connect their Bitcoin wallet to it. Once they do that, they can use their Bitcoin debit card just like one would use a bank debit card. This includes the typical fees associated with transfer or withdrawal. Because the price of Bitcoin is constantly changing, cardholders need to be aware of exactly how much they possess so that they have enough to complete each transaction.
What are the Benefits and Disadvantages of Bitcoin Credit Cards?
A Bitcoin credit card will not be the right fit for everyone. It is crucial to research before choosing a credit card because there are often extra transaction fees associated with cryptocurrency, in addition to the typical card fees. Before someone signs up, they should know what the rewards rates are, if there are any annual fees, if there are other hidden fees, and what benefits come with the card. Then, they must evaluate how vital the benefits are relative to their other options. Advantages include investing in cryptocurrency without using cash from savings. However, a disadvantage is users might have their credit score drop if they increase their outstanding balance too much.
Currently, credit cards have limited their dependency on Bitcoin because it is still so volatile. That is why most companies embrace a redemption system and little else. It is up to each consumer to decide if this credit card is worth the risks and if the rewards would benefit them and their portfolio.