Key Takeaways
A typical crypto card allows you to earn cryptocurrency rewards or instantly convert your crypto into fiat currency to pay for goods and services. Both Mastercard and Visa issue crypto cards, meaning you can use your digital assets at millions of locations worldwide.
A prepaid crypto card is similar to a debit card in that you must load it with cryptocurrency funds before use. You can obtain a crypto card from an authorized issuer, such as a cryptocurrency exchange or a bank. However, crypto cards are not without risks. The funds stored on the card can lose market value, and any transactions you make with your card will likely be subject to taxation.
Crypto credit cards function more like standard credit cards but offer cryptocurrency rewards. You can pay your credit card bill using fiat currency and receive crypto bonuses based on your spending.
Introduction
While interest in cryptocurrencies often centers on their investment potential, their use for transferring value is also a significant application. Satoshi Nakamoto created Bitcoin not just to make people wealthy but as a global digital payment system. One way to achieve this goal is through crypto cards. This payment method helps people use cryptocurrencies and digital assets in their daily lives and even earn crypto rewards.
What Is a Crypto Card?
A typical crypto card works similarly to a debit card. You can use it to pay for goods and services wherever the card provider is accepted. Although it might seem like you're paying the merchant directly with digital currencies, that's not what happens. The merchant receives fiat currency in their account, not cryptocurrency. Your crypto card takes cryptocurrency from your linked account, converts it to the local currency of the transaction, and then uses that fiat currency to complete the payment. We'll explain this process further with an example later.
Both Visa and Mastercard offer crypto cards through licensed partner companies. These two companies are the most widely used payment providers globally, making crypto cards nearly universally accepted by merchants. Some crypto cards only offer cryptocurrency rewards for money spent using the card. These are typically credit cards that require a credit check to obtain.
How Does a Crypto Card Work?
As mentioned, a crypto card doesn't actually pay the merchant with cryptocurrency. Instead, it conveniently converts your crypto into spendable cash at the point of sale.
For example, imagine you have $500 worth of BNB in your crypto card's funding wallet. At a restaurant, you pay a $100 bill with your crypto card. Once you insert the card and accept the payment, the system sells $100 worth of your BNB and loads the fiat currency onto the card. The restaurant then receives the $100 payment, and your funding wallet will be left with $400 worth of BNB. This entire process happens within the few seconds it takes to use your card.
You can also use your crypto card for ATM withdrawals if your service provider supports it. The same method described above is used to withdraw cash.
Differences Between Crypto Cards and Credit/Debit Cards
There are a few minor differences between credit/debit cards and crypto cards. For the most part, they function similarly when it comes to payments. The most significant difference between a crypto card and a credit/debit card is that the former must be loaded with cryptocurrency. Debit cards are preloaded with fiat currency, and credit card transactions are later paid with fiat as well.
A prepaid crypto card works similarly to a traditional debit card. You need to add funds to your account before you can spend them. However, you cannot add fiat currency to your crypto card—only cryptocurrency. When you make a payment, the funds are immediately converted from your cryptocurrency wallet.
On the other hand, crypto credit cards extend a line of credit that allows you to make purchases now and pay later. You can pay your crypto credit card bill with fiat currency, meaning this type of card is essentially a credit card with crypto rewards.
To apply for a card, you must be a customer of a company that already provides crypto cards, such as a cryptocurrency exchange or a bank that supports cryptocurrencies. The application process includes completing Know Your Customer (KYC) and Anti-Money Laundering (AML) verifications before you can obtain your crypto card, just like with any standard credit or debit card. For a crypto credit card, you'll also need to pass a credit check.
Advantages of Crypto Cards
The main advantage of a prepaid crypto card is the ability to use your cryptocurrency for everyday purchases. This has traditionally been difficult unless merchants accepted cryptocurrencies directly. Even then, transactions with some coins like Bitcoin can take up to 30 minutes to confirm. The price is also volatile, meaning you might end up paying more or less than expected.
Many crypto cards come with additional benefits such as cashback rewards or discounts for certain subscriptions like Spotify or Netflix. These perks draw attention to specific card service providers and are similar to those offered by standard debit/credit cards. Make sure to compare what each card offers to find the best benefits for you. Don't forget to also check the exchange fees you might have to pay during conversion processes.
Do Crypto Cards Have Risks?
Using a crypto card carries the same risks as holding cryptocurrencies. If you loaded your account with Bitcoin (BTC) or Ether (ETH), the fiat value of your account will constantly change. This means you might not have the exact amount of money you think in your account, depending on exchange rates.
You should also remember that in many tax jurisdictions, spending cryptocurrency is a taxable event. It doesn't matter if you're spending a few dollars on coffee or thousands of dollars on a car. If you've made gains or losses on your cryptocurrencies before using them to make a purchase with your crypto card, you'll need to pay or deduct the corresponding taxable amount.
You can avoid this issue by acquiring stablecoins to use with your crypto card, as their price rarely varies from the pegged value.
Frequently Asked Questions
How do I choose the right crypto card for my needs?
Consider factors like supported cryptocurrencies, fees, reward structures, and availability in your region. Compare different cards based on your spending habits and whether you prefer prepaid or credit options. Also check for additional benefits like cashback programs or subscription discounts.
Are crypto card transactions anonymous?
No, crypto card transactions are not anonymous. Providers require KYC and AML verification, and all transactions are recorded. Tax authorities may also require reporting of cryptocurrency spending, so maintaining proper records is essential.
Can I use my crypto card for online purchases?
Yes, most crypto cards can be used for online purchases just like traditional debit or credit cards. Some providers even offer virtual cards that can be added to digital wallets like Apple Pay or Google Pay for convenient online spending.
What happens if the cryptocurrency market crashes while I'm using my card?
If the market crashes, the value of your crypto holdings decreases, which means you'll have less spending power on your card. This volatility risk is why some users prefer to load their cards with stablecoins for more predictable spending value.
How quickly are cryptocurrencies converted when I make a purchase?
The conversion happens almost instantly at the moment of transaction. The system automatically sells your cryptocurrency at current market rates and converts it to the local fiat currency needed for the payment.
Can I reload my crypto card with fiat currency?
Most crypto cards are designed to be loaded only with cryptocurrency. However, some providers may offer hybrid options that allow both crypto and fiat funding. Check with your specific card provider for their funding options.
Conclusion
If you have some cryptocurrencies that you no longer wish to hold long-term, a crypto card simplifies conversion to fiat currency. Without a crypto card, you would need to go through the conversion process and manually transfer the fiat money to your bank account. This can take days, depending on your bank and cryptocurrency exchange. 👉 Explore convenient crypto spending options that can help streamline your digital asset usage. A crypto card is one of the fastest ways to use your cryptocurrencies for purchases, representing positive advancement in adoption. However, always make sure to keep proper accounting of your spending for tax purposes.