Cryptocurrency has become a significantly valuable asset for investment. With the estimated global value of all cryptocurrencies touching $2 trillion and still growing, more companies in the financial sector want to get involved one way or the other. Credit card companies, for example, are seeking to attract new customers with crypto. This is why there are now crypto credit cards in the market that offer rewards in the form of cryptocurrencies.
So, what are these credit cards and should you get one? Find out the answers here.
What are Crypto Credit Cards & How Do They Work?
Crypto credit cards are credit cards that allow you to both spend and earn cryptocurrency rewards. They work similarly to any other standard credit card. You will be rewarded whenever you spend on your card, but the rewards are in the form of cryptos. However, different cards process and award crypto coins in different ways.
Consider the following rewards program of a typical crypto credit card:
- 1.5% cash back in the form of cryptocurrency on eligible purchases
- Higher cashback in crypto on eligible purchases exceeding a certain amount in annual spend
- Higher cashbacks in crypto during the first 90 days of membership
When the points get deposited and your account gets into good standing, the card company will allow you to convert the points into your desired cryptocurrency. Some companies allow you instant access to the rewards.
Before you select a crypto credit card, it is important to study the rewards process. While these cards require one or more additional steps to access the rewards when compared to traditional cards, they can be worth the wait for those interested in cryptocurrency investment.
Should You Get a Crypto Credit Card?
You must get a crypto credit card by matching your spending habits with its reward criteria. It is important to weigh up what each card provides against the costs. You should consider the following points before applying:
i. Taxes
A crypto credit can help you earn rewards with the potential to increase in value. On the other hand, standard cashback and other rewards tend to lose value due to devaluation and inflation. However, the standard rewards are not taxable. When you earn cryptos through your card, they are classified as assets and become taxable when you sell them. It is recommended to consult a tax expert if you plan on earning and selling a lot of cryptocurrencies.
ii. Flexibility
Before you apply for a crypto credit card, you should determine the cryptocurrencies you are interested in. This is important because different cards have different portfolios of cryptos that are offered as rewards. If you are interested in certain coins, make sure the card supports them. For more information visit the Bitcoin Pro platform.
iii. Limitations
There are different laws in different jurisdictions. This means that not everyone is eligible for every crypto credit card available on the market. Before applying for a card, make sure to check the terms and conditions of each card.
Besides these, it is recommended to consider and compare the following factors:
- Rewards rates
- Annual fees
- Additional fees
- Additional perks or benefits
It is recommended to select a card that offers better value.
Rewards in the form of cryptocurrencies can seem to be lucrative, especially when high-value coins like Bitcoin and Ethereum are involved. While crypto rewards seem to be lucrative, digital coins are known for their extreme volatility.
Impact of Crypto Credit Cards on Your Credit?
Crypto credit cards are different from traditional credit cards in that they offer different types of rewards. They affect credit scores the same way as traditional cards. When you apply, the credit inquiry is going to make a small and temporary impact on your credit score. Such cards usually require above-average credit and you can also choose a pre approval process path to determine your chances of approval.
Once you open the account, it is recommended to maintain a low balance relative to your credit limit while paying off the bill on time. The rest of the rules are similar to those for traditional credit cards.
Currently, there are very few companies in the market that offer crypto credit cards, especially in North America. Many are lined up to be launched within a few months. As the cryptocurrency revolution surges on, these credit cards are expected to become the norm in the near future.
