Most people are aware of the credit and debit card concepts, what they are, and how they work, including their pros and cons. However, not many people know about crypto debit cards. Cryptocurrency has quickly taken the world by storm. This incredible technology has helped usher in a new era of digital finances. Digital currency is the main driving factor in transforming the traditional finance structure into a completely new, decentralized form.
- What is crypto card?
- How crypto cards work
- Availability of service in your location
- Crypto card and tax payments
- The supported cryptocurrencies
As cryptocurrency advances, recent developments have reshaped traditional finance and gave way to cryptocurrency-funded cards that are changing the game big time. Let’s talk about what these crypto cards are, how they work, how to use them, and more.
1. What is a Crypto Card?
Crypto cards or crypto debit cards are almost the same as your regular debit cards. They are based on the same premise. Traditional debit cards use the funds attached to the banking account to allow the cardholder to pay for services and goods electronically. However, crypto cards use a crypto wallet you have with a cryptocurrency payment processing company to allow you to pay for what you need electronically. It connects your crypto wallet to the crypto payment processing service to enable you to complete transactions at any retailer or merchant that accepts crypto cards. The main difference between a traditional debit card and a crypto card is that a crypto card automatically converts whatever cryptocurrency you might have in your crypto wallet into the preferred fiat currency.
2. How Crypto Cards Work
There are still some limitations to using cryptocurrency in the real world. Unlike Visa and MasterCard, you can’t just walk into any shop and pay for their goods with Bitcoin, as most retailers still don’t accept the crypto. There are several reasons why there are so cautious with digital currencies:
- Many payment processing services are still uncertain of the legal status of digital currencies.
- Exchange rate volatility.
- Many merchants and retailers have little to no understanding of the blockchain technology that powers cryptocurrencies.
However, traditional financial and crypto card companies are looking for the best ways to make cryptocurrency a legitimate and valid form of payment as more and more merchants and retailers are becoming aware of how swift, secure, and accessible this form of payment can be in the real world.
3. Availability of Service in Your Location
If you want to have a crypto card, there are many things to consider before you find the right one that matches your financial needs. Availability is the first thing that comes to mind.
Even though the level of cryptocurrency adoption is higher today than ever before, crypto is yet to achieve global domination. There are even countries looking to ban cryptocurrencies by declaring them contraband and placing full bans.
On the other hand, countries like the United States are considering creating a national digital currency that will be used for selling, buying, trading, and exchanging crypto coins. Before you decide to start using a crypto card, make sure it is available and usable in your location by ensuring that your local merchants, retailers, and POS processors accept both crypto cards and digital currencies.
4. Crypto Cards Transactions Involve Tax Payments
Regardless of cryptocurrencies being decentralized, you still have to pay tax on your crypto card transactions. According to the IRS, cryptocurrency is considered property or capital asset, to be precise. All cryptocurrencies such as Bitcoin are considered financial instruments.
Therefore, they function similarly to stocks and bonds. If you have capital gains or losses in digital currencies, you need to report these when purchasing goods or paying for services using your crypto card.
There is also one more thing to keep in mind here – you also need to pay taxes on your crypto gains when paying for goods or services using a crypto card if the price of your cryptocurrency is higher at the time of the transaction than when you acquired your card.
5. The Supported Cryptocurrencies
You need to pay special attention to the supported cryptocurrencies in your area. Let’s say that your crypto card is funded with Bitcoin. Even if a retailer doesn’t accept Bitcoin, it still accepts debit cards. In other words, you’ll still be able to make a purchase, but you’ll have to pay a conversion fee for converting Bitcoin into the preferred fiat currency.
While there are thousands of different digital currencies today, only a few of them are accepted worldwide. That is why you should carefully choose the crypto card that supports the most popular tokens in your country or a card that supports multiple digital currencies. Keep in mind that different crypto card providers charge different exchange rates and transaction fees.
Pros and Cons of Crypto Cards
- Converts your digital currencies into fiat currencies
- Waived or reduced foreign transaction/ conversion fees
- Multi-currency cards allow diversified shopping and spending
- Crypto cash-back rewards
- Waived ATM withdrawal fees
- Digital currency loss and gains involve tax payment
- Certain countries ban crypto
- Many retailers and merchants don’t accept cryptocurrencies
- You must have funds in your crypto wallet to use a card
Available Crypto Cards (Debit/ Credit)
|Cryptocurrency Cards||Annual Fee||APR||Special Offer||Credit Needed|
|Upgrade Bitcoin Rewards Visa||$0||8.99% – 29.99%||1.5% unlimited||Fair|
|Coinbase Visa Debit Card||$0||0% Fixed||$5 in bitcoin*||Accepts All|
|BlockFi Bitcoin Rewards Visa||$0||See Terms||up to 3.5% crypto back*||Good|
|Quontic Mastercard Debit Card||$0||0% Fixed||1.01% APY||Accepts All|
|Sofi World Elite Mastercard||$0||12.99% – 24.99%||up to 4% crypto back*||Fair|
The Bottom Line
When Bitcoin was first introduced over a decade ago, no one could have imagined that it would become one of the most popular digital currencies in the world. What used to be just a concept of a digital currency turned into a full-time industry. Nowadays, cryptocurrencies have found their way into almost every industry in the world. In the case of debit card issuers, cryptocurrencies such as Bitcoin have been connected to traditional debit cards, creating a completely new financial service. Since this service is becoming increasingly popular each day, do some research before you decide to have a crypto card to better understand the terms and conditions of using such a card.