Cryptocurrencies have already shown great promise when it comes to revamping the global financial landscape and providing a new way of interacting with money. However, with the assets being already over a decade old, several overlaps with the traditional financial space should be noted.
One of the most prominent is what seems to be a mix between cryptocurrencies and credit cards. There are already companies that manufacture credit cards that allow users to spend their cryptocurrencies in different locations and stores. However, crypto rewards cards are another innovation that shouldn't be left out.
Crypto rewards cards are still a nascent innovation, and it is worth examining them to see what they offer. Also, many experts are arguing over whether these cards are a good idea or not, so it is also a great time to see how they could fit into the rapidly changing financial landscape.
Running Through Bitcoin's History
Every avid cryptocurrency fan understands a bit of Bitcoin's history. The asset burst into the limelight in 2008 as a decentralized currency that allowed easy and seamless asset transfers. Bitcoin was essentially valued at nothing when it first hit the market, and it remained so for a while. As of 2010, the asset held a value equivalent to $0.0008.
This March, it crossed $60,000 in value for the first time.
Bitcoin's popularity has led to a proliferation of assets worldwide. Today, there are over 4,000 cryptocurrencies on the market, all providing users with the ability to choose and enjoy their use cases.
Understanding Crypto Reward Cards
Several crypto innovations have cropped up in the market and are making waves. Crypto reward cards are one of the newest. They provide attractive incentives for using them, and with the way cryptocurrencies are gaining in value, users stand to gain a great deal from them.
Crypto reward cards might sound confusing on the surface, but they aren't really different from the traditional rewards credit cards we know. Like the most famous credit cards available, these are circulated across by some of the biggest payment processors - Mastercard and VISA. So, these cards are pretty much acceptable wherever traditional credit cards from the same payment processors are accepted.
The crypto rewards credit cards are also similar to traditional reward cards in how they work for making purchases. Like the conventional options, holders of these cards get credit lines, all based on their perceived creditworthiness. They can use these lines of credit to make dollar purchases. So, whenever you spend a credit line, you will have to pay back what you owe - as well as the potential interest you get on a purchase if you don't make your payment before the end of your billing cycle.
As expected, you are eligible for rewards whenever you spend your crypto rewards card. Most traditional cards reward you with things like cash back or airline miles, but crypto rewards cards give you cryptocurrencies in return.
The Crypto Debit Cards
With cryptocurrencies becoming more mainstream, there is also a need for asset holders to access their funds more quickly to spend. Until recently, crypto owners could only invest and hold their assets for the long term. To cash their assets out for daily spending, holders would need to convert their assets to specific fiat currencies and wait for the funds to get into their bank accounts.
Sadly, this process is relatively slow.
So, crypto debit cards have come into their fold. Their launch completely revolutionized the industry, growing interest in digital assets and spurring greater adoption among users.
Crypto rewards debit cards work for merchants just like the standard debit cards. Instead of being banked by regular bank accounts, however, they are backed by users' wallets.
Here's how they work - your digital asset is converted to your preferred fiat currency, then it is loaded onto your card. Once loaded, you can process your purchases with your specific fiat currency. However, rewards are given as a particular asset based on the card itself.
Some of these cards could also pay rewards when you use them for daily transactions. Depending on the value of the assets, these rewards can be somewhat lucrative.
The Crypto Card Wars: Rewards Credit Cards vs. Rewards Debit Cards
Even though they work with major payment processors and can provide rewards, crypto reward cards are evidently different from traditional card options.
The primary difference here is that with crypto cards, holders make purchases on credit via the institution's allowed credit line. So, they will be responsible for paying the balance back. Essentially, users pay with their funds. If they don't have any money, they can't use the cards.
Sadly, one problem with these cards is that they usually earn rewards in a bank-specified cryptocurrency. Most banks don't go for Bitcoin because it is in such high demand, and its price is usually on the uptrend. So, they go for some altcoin that doesn't have as much value as top names like Bitcoin and Ether.
Take the Crypto.com Rewards VISA Card. Crypto.com touts its cashback policy of 8 percent on all purchases, but that 8 percent is in the form of CRO, the company's in-house token. The asset's value is currently pegged at $0.20. So, a $100 purchase will earn you 8 CRO - about $1.60.
The problem isn't that these cashback numbers aren't great - it's usually that they are pegged to assets that barely move and which aren't such great investments in the first place.
Cardholders also tend to have to deal with the cards and their proof-of-stake obligation. In its most basic form, proof-of-stake is when a digital asset holder has to contribute some of their assets to a blockchain network to support it. Some debit cards require this before you become a cardholder. So, you will need to tie your money up with the company that issues the card. The rewards you get might not be worth as much when you still have to tie some capital up with the financial institution.