Crypto-related credit cards are beginning to catch on. They’re being put forth by crypto exchanges, new companies, and major credit card providers — and sometimes by combinations of these entities. This represents an exciting ongoing development for those who want to see cryptocurrency become more practically useful in the world, and many are understandably looking to acquire the cards. It may well be the right move for some people! However, it’s still important to take a diligent approach, as is the case with any new credit card acquisition.
In particular, there are five questions that need to be addressed before you start the process of getting your own crypto credit card.
How does the card work?
The most important thing to recognize about crypto credit cards is that they don’t all operate the same way. This was made particularly clear in a recent ZDNet write-up on the best crypto cards of 2021, which made clear that leading options have different ways of handling payment, funding, and rewards. Some crypto cards are essentially ordinary credit cards that simply offer cryptocurrency reward (say, in lieu of “cash back” options). Others connect to users’ crypto wallets such that cryptocurrency is actually spent during transactions. Before pursuing one of these cards yourself, it’s important to understand these differences, identify your priority, and find the specific options that match what you’re looking for.
Where is it compatible?
When we looked into the crypto credit card being launched by Biser a few years ago, we noted that it would be compatible in any retail shop supporting either MasterCard or Unionpay. That makes for fairly broad acceptance, mind you — but not universal. Right now a lot of crypto cards are similarly compatible with specific bank service acceptance, and these specifics are worth looking into before you apply. If a given crypto card appeals to you, make sure you’ll be able to use it where you’ll want to.
What is the APR?
APR (annual percentage rate) is usually one of the primary factors mentioned in assessments of ordinary credit cards, but seems to be left out of most crypto card discussion. As a succinct reminder, Petal Card defines APR as the rate determining how much interest is charged on top of what you borrow with your credit spending. If you don’t pay down your balance on time, APR is applied and the amount you have to pay grows. This is true of crypto credit cards as well, and may be particularly relevant in cases when users spend a lot in the first few months in order to qualify for specific rewards. Yet for whatever reason APR is not as clearly advertised for some crypto cards as for standard credit cards. Be sure to look up the rates before applying for a card you’re interested in, because a high APR can be problematic.
Will you be taxed?
Recently, CNBC posted a particularly important article for people interested in crypto credit cards. The article was clarifying that paying for goods and services with cryptocurrency is technically a taxable event, at least in some countries (with that article pertaining to the U.S. specifically). The idea is essentially that cryptocurrency is a commodity, and represents property gained. “Spending” that property can trigger a capital gains tax, which many don’t realize. It isn’t necessarily a significant issue for all users, but those seeking crypto cards should at least look into potential tax situations.
What is your reward priority?
Finally, ask yourself what your reward priority is. Right now, with cryptocurrency still new and exciting (and in 2021, largely gaining value), the idea of earning “cash back” in the form of cryptocurrency is exciting. But before getting swept up in this excitement, consider the alternatives and what your priorities might be. What if, for instance, cryptocurrency takes a downward turn and your rewards lose value? In this event, you may find yourself wishing you’d opted for a regular credit card with, say, cash rewards or sky miles perks. That’s not to say crypto rewards aren’t worthwhile, but do take the time to consider your preferences.