The pros and cons of using a Crypto Rewards card
Crypto debit cards are available from several leading crypto exchanges. Some platforms have also launched crypto credit but prepaid debit cards are more common and easier to purchase.
Many of these prepaid cards are rewarding, just like you might with a credit card, and they usually don’t charge an annual fee. However, there are some big differences that you should be aware of before signing up.
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Benefits of crypto prepaid debit cards
Here are some of the benefits of crypto debit cards that you should know about.
There is no credit check
When you apply for a regular credit card, you must submit your personal information and allow the card issuer to do a credit check to extract your credit information. If you don’t have a good credit score, you might not qualify for the best credit cards with the most valuable rewards or benefits.
On the other hand, your credit score is not a factor in qualifying for a prepaid debit card since you do not have access to any credit. Instead, you’ll need to top up your balance as needed.
It’s easy to convert your crypto into spending money
One of the main attractions of crypto debit cards is that you can use your cryptocurrency assets to top up your balance. Since it can be tedious to withdraw money from an exchange into your bank account, it makes it easier for crypto investors to spend their assets.
However, be aware that there may be tax implications when spending your crypto. You should keep track of each instance where you trade or use your crypto. Additionally, if you are a buy and hold investor, you may not want to use your cryptocurrency investments for your daily spending.
You can earn rewards
The ability to earn rewards for spending you would anyway is one of the biggest reasons people sign up for credit cards. However, credit cards can come with annual fees and the temptation to spend money you don’t have, leading to debt.
These prepaid debit cards allow you to earn rewards without owning a credit card. The rewards vary from platform to platform; for example, I earn 2% on most of my spending with a Crypto.com card. There is no annual fee, but I have to wager (lock in) around $ 400 in token from Crypto.com, CRO. I must point out that my CRO has lost value since I bought it, which is a factor you need to take into account.
Other exchanges don’t require you to wager coins in order to qualify for the card or get higher reward rates. It’s worth shopping around to find the card that’s right for you.
You can get additional benefits
Like reward credit cards, prepaid crypto debit cards can give you additional benefits. For example, I am entitled to a discount on my monthly Spotify subscription. Different wagering levels on Crypto.com earn you different cash rewards and other benefits.
Don’t let the perks fool you by choosing the wrong card, however. If you can get a better reward rate with another platform, it may be the best deal, especially if you aren’t making full use of the extra perks.
Disadvantages of Crypto Prepaid Debit Cards
There are also some negatives that you will need to consider before getting an encrypted debit card.
You don’t get the same coverage you get with a credit card
When you buy a credit card, you usually get a series of additional protections against fraud and purchases. It’s easy to take them for granted, but prepaid debit cards may not offer the same benefits.
For example, if you pay for an item with your credit card and it is stolen or damaged soon after, you may be able to get your money back. Likewise, you will generally have no liability for fraudulent charges.
On the other hand, you’re unlikely to get purchase protection with your prepaid debit card. You will also need to read the terms and conditions carefully to understand what fraud protection is in place. The card was not issued by a bank or credit card provider, so you can’t just assume you’ll get the protections you’re used to.
For example, my Visa Crypto.com debit card offers some fraud protection – it says I can file a chargeback to get the money back. It is not the same as zero liability. And I would have to freeze my card to file a chargeback, and I might have to pay a fee to get a new card issued.
The card may not be universally accepted
Most of the cards offered by crypto exchanges are Visa debit cards and claim to work anywhere you can use Visa. However, in my experience, this has not always been the case. Most recently my payments to Rappi stopped working and haven’t restarted yet.
Also, cardholders don’t earn rewards on all of their spending. For example, with Crypto.com, payments to everything from graphic designers to libraries and souvenir shops may not earn crypto rewards.
You won’t build your credit history
Using a normal credit card can help you build up your credit history, which in turn contributes to a higher credit score. A history of on-time payments shows that you can manage credit responsibly and is an important factor in calculating your score.
Since it’s a prepaid debit card, you don’t borrow money. This Is means you can’t go into debt that you can’t afford to pay, or your credit is damaged by missing a payment. But if you want to create a payment history, you had better go with a secured credit card. To open a secured credit card, you must deposit a refundable security deposit to make up for your low credit rating.
You have to keep it filled
Finally, if you are opening a prepaid debit card, you will need to make sure that there is enough money on the card to cover your purchases. If you are using it to sign up for automatic monthly payments, you will need to keep an eye on your balance.
Crypto debit cards can offer many benefits, but don’t get one just because they have the word “crypto” in their name. Read the fine print and compare the card to a traditional credit or debit card to make sure you get the best deal possible.