How do crypto credit cards work?

Cryptocurrency is quickly becoming an incredibly valuable 'asset' in investment portfolios around the world. According to CoinMarketCap, the value of all available cryptocurrencies is over $2 trillion — and it's only getting bigger.

Traditional and startup financial service companies have taken notice, and they're looking to attract new customers with crypto. And rather than a having a credit card that gives travel rewards or cash back on purchases, there are cards that offer rewards in cryptocurrency.

Select details how these new type of credit cards work, what to expect and how to evaluate if a crypto credit card is right for your wallet.

Crypto credit cards work exactly the same as any other rewards credit card on the market: you're rewarded as you spend on the card. But in this case, you're given cryptocurrency for your purchases. However, keep in mind that each card differs in how they process and award the cryptocurrency for their cardholders.

For example, the BlockFi Rewards Visa Signature Credit Card gives cardholders the following:

• 1.5% back in crypto on all eligible purchases
• 2% back in crypto on all eligible purchases over $30,000 of annual spend

But since there are thousands of cryptocurrencies that you can hold, the card actually rewards you with BlockFi Cryptocurrency Rewards Points. Once the points are deposited and the cardholder account is in good standing, BlockFi will let you convert the points into the cryptocurrency of your choice.

Conversely, the Gemini Credit Card® deposits cryptocurrency directly into your Gemini account every time you swipe your card — giving you instant access to your rewards — rather than having to wait for the monthly statement to cut.

So when you're researching crypto credit cards, be sure to find out what the process is for rewarding cardholders. It may require an additional step or two compared to more traditional credit cards, but it could be worth it if you have interest in cryptocurrency investing.

Also keep in mind that not all of these are solely credit cards, as there are several debit cards available such as the Coinbase and Crypto.com debit cards. So if you're averse to credit cards, you don't have to miss out on your purchases earning you more crypto for your portfolio.

But remember that the crypto cards still function as normal credit cards, so the balances need to be paid off each month or else you'll have to pay interest or late fees. While you'll usually buy things and pay off your card in US dollars, some cards allow you to make purchases (and pay off your card) with cryptocurrency that's in your associated account.

Additionally, the cards affect your credit score the same way as a traditional card, and there may be fees attached to using the card such as annual fees or transaction fees. Make sure to check the terms and conditions for each card to understand what rules apply.

Having a crypto card is a bit more complex than a traditional credit card, so here are a few things to consider before you apply:

• Taxes: One of the best parts of a crypto card is the ability to earn rewards that have the potential to rise in value, whereas cash back and travel rewards likely lose value due to inflation and devaluation, respectively. However, these rewards are not taxable, whereas if you earn crypto, it's considered an asset which is taxable if you decide to sell it. So if you plan to earn or sell a substantial amount of cryptocurrency, you may want to consult a tax professional for guidance.
• Flexibility: Each crypto card has a different portfolio of cryptocurrencies you're able to earn rewards in. If you want to invest in specific coins, be sure to find out if the card, and the exchange that supports it, will allow you to invest in the coin you want.
• Benefits: Many crypto cards are bare-boned when it comes to benefits, so if you're an avid traveler, you may find more value in a travel rewards credit card. Or if you are trying to save money each month on your purchases, a cash back credit card may serve your needs more effectively.
• Limitations: Because of varying state laws around the county, not every crypto card is available to everyone. So before applying, be sure to check each card's terms and conditions to see if you live in an eligible state. Additionally, if you're managing your cryptocurrency account outside of the United States, you may be violating international laws, so the crypto rewards you earn are best handled within the U.S.

Some crypto cards are offering a waitlist, but if you're eager to apply and start earning—the following cards are open for application.

Crypto debit cards

• Crypto.com Visa Debit Card: You'll earn rewards in CRO, Crypto.com's own cryptocurrency.
• Coinbase Debit Card: You can choose to earn rewards from eight types of crypto, including Bitcoin, Ethereum and Dogecoin.

Crypto credit cards

• Venmo Credit Card: You can automatically purchase Bitcoin, Ethereum, Litecoin, or Bitcoin Cash with the cash back earned from purchases.
• Brex Business Card: You can spend your rewards points you earn on the card on either Bitcoin or Ethereum.
• BlockFi Credit Card: You can choose to earn rewards in a dozen types of crypto, including Bitcoin and Ethereum.

There are only a few types of credit card rewards, but now, cryptocurrency has been added to that list. It's an exciting innovation in the credit card industry, but similar to nearly every decision you make in regards to your personal finances, make sure that crypto rewards makes sense for you.

Additionally, remember that it's important to always spend responsibly, even if the rewards can potentially increase in value. Credit card debt is never a good idea, and overspending on a credit card could lead to heavy interest charges.

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