Cryptocurrency is bringing forth new innovations to make it acceptable and usable by all. One such recent innovation is the crypto debit card.
Major crypto exchanges and brokers have launched debit and credit cards to allow users to spend cryptocurrency on various products and services. Even financial services corporation Visa (NYSE:V) acknowledged the rise in crypto debit card payments, stating that customers made $2.5 billion in payments with its crypto-linked cards in the first quarter of 2022.
Visa’s CFO, Vasant Prabhu, added that people are using their crypto-linked cards to spend on retail goods and services, restaurants, and travel. So if you’ve been thinking about getting a crypto debit card to facilitate your spending, you might want to read this article. In this piece, you’ll learn about crypto debit cards and how to determine if it’s right for you.
What Are Crypto Debit Cards, and How Do They Work?
A crypto debit card is much like your regular debit card, but instead of being connected to your bank account, it’s tied to a digital wallet that contains your cryptocurrency. It can also be used at various Automated Teller Machines (ATMs) that support cryptocurrency.
However, the significant difference between a crypto debit card and a conventional debit card is that the former instantly converts the cryptocurrency you use to your selected fiat currency. Also, with a crypto debit card, you can use cryptocurrencies in your wallet to complete transactions in any business that accepts debit cards.
How Do Crypto Debit Cards Work?
When you use a crypto debit card to make a purchase, the funds will be withdrawn from your crypto wallet or crypto investment account and automatically converted to the acceptable currency of the merchant. More so, just like regular debit cards, the user will be required to have sufficient cryptocurrency in a digital wallet (i.e. crypto investment account) to make a purchase.
Additionally, it is crucial to keep in mind that the type of crypto debit cards used will determine exactly how cryptocurrency is converted to fiat. Occasionally, users may be able to keep their currency in crypto form until a purchase is initiated, or they may need to manually convert their cryptocurrency to their preferred fiat currency.
Ways Crypto Debit Cards Convert Crypto
Generally, crypto debit cards convert crypto in three different ways:
1. Crypto to Fiat: This conversion process is the most common way users fund their crypto debit cards. For this to happen, you’ll have to manually sell your crypto for fiat on the exchange platform. The crypto is then converted to fiat at market price.
Once this is done, the fiat is sent to your platform account. You can then fund your crypto from the account and begin shopping. CoinJar Card and Club Swan Cards are typical cards that work this way.
2. Crypto to Stablecoin to Fiat: Debit cards in this conversion category convert your cryptocurrency to stablecoin. A stablecoin is a digital token linked to a stable external asset, mostly the U.S. dollar. The major benefit of converting your crypto to stablecoins is that you won’t lose value due to crypto volatility.
When you need to make a purchase, all you need to do is to convert the stablecoins to fiat. The pegged ratio governs the conversion of stablecoins to fiat.
3. Crypto to Stablecoin: Some debit cards strictly allow you to manually convert cryptocurrency directly to stablecoins. After this conversion, the system then takes care of the rest. Moreover, you might think that your payment is received in stablecoins, but in actuality, it’s fiat, majorly the U.S. dollar.
For example, the Coinbase (NASDAQ:COIN) card lets users convert their crypto to USD coins (USDC). This coin is usually pegged at a ratio of 1:1 to the U.S dollar. Ultimately, the USDC gets converted to fiat.
Pros and Cons of Getting a Crypto Debit Card
Cryptocurrency debit cards have become very popular in recent times and are now widely used by many due to the many benefits they offer. Some of these benefits include but are not limited to the following:
1. Convenience: Just as traditional debit cards offer convenience, so do crypto debit cards. Compared to an e-wallet, standard transactions and payments made online are simpler and faster because you will only have to wait for a few minutes.
Using cryptocurrency for daily spending was highly difficult in previous years. Crypto debit cards have made it easier to spend your cryptocurrency on available goods and services.
2. Security: Crypto debit cards run on a tight security network designed by the card issuing companies, so you can rest assured that your cryptocurrency is safe. With the news of crypto theft here and there, these card issuing companies leave nothing to chance.
They have incorporated some pretty advanced security measures that can prevent any type of scam. The card is connected to your e-wallet that has a unique password, 2F authentication, and a biometric scanner. If your card gets stolen, you can disable it over an app on your phone by reporting a steal.
3. Payment Flexibility: With a crypto debit card, money conversion when you are traveling abroad is easy. Since some countries now use crypto ATMs and some businesses enable them, you can easily pay for what you purchase. Your crypto will be automatically converted into local currency without extra expenses.
On the Flipside
1. Potentially High Fees: Fees can vary depending on your card. Fees such as transaction fees, and inactivity fees, among others, are fees you are most likely to face when using a crypto debit card. In the case of Coinbase, you’ll be charged a 2.49% transaction fee when you use your debit card on all purchases, including ATM withdrawals made with other cryptocurrencies besides USDC.
2. Crypto Taxes: In some countries, crypto is subject to tax if you sell or use your crypto in a transaction. This is because you trigger capital gains or losses if its market value has changed.
In the U.S., for example, the IRS considers crypto as capital assets similar to bonds and stocks. This means that your crypto is subject to taxation in case of any capital gains.
Things to Consider Before Getting a Crypto Debit Card
There are some important factors to consider before choosing a preferred crypto debit card. So, while you are eager to get yourself a crypto debit card, you should take the following into consideration:
1.Charges: It is important to be aware that most crypto debit cards include fees. These charges could apply to, among other things, ATM withdrawals, monthly maintenance, and international transactions. It’s important to pick a debit card with the least cost implication.
2. Supported Currencies: Although crypto debit cards are great, they do not support every cryptocurrency. Only the major ones are usually supported, which may pose a limitation in some cases. As such, you’ll need to get a debit card that supports those major ones.
3. Availability of Service: Crypto is still gaining ground in many countries, so different crypto cards may have regional restrictions depending on local laws, implying that they may not be available in every country. Some crypto debit cards are strictly accessible in select regions, such as the EU or the US. You’ll need to find a debit card that is accepted in your area.
Are Crypto Debit Cards Safe to Use?
The short answer is “yes.” However, most Crypto debit cards are just as secure as traditional cards. They have additional security features like two-factor authentication, biometric scanning, and mobile codes.
In fact, through a mobile app, you can immediately freeze or cancel your debit card. In the context of your card being stolen, you can freeze it or change the PIN. You can also report the loss on the app too.
Should You Really Get a Crypto Debit Card?
Deciding whether to get a crypto debit card eventually comes down to your spending habits and financial portfolio. You also need to consider the three factors mentioned earlier, such as fees, availability of service, etc.
If you’ve got steep investments in crypto and are looking for a way to convert your cryptocurrency into cash, a crypto debit card is the most likely way to go. Crypto debit cards are definitely worth it if you want a simple and convenient way to spend or earn crypto.
Why You Should Care
The increased adoption of crypto debit cards is a great way to increase the popularity and usage of cryptocurrencies worldwide. They offer many advantages and advanced security measures for users.
Of course, crypto debit cards are a strong step forward in pushing the implementation of digital currencies as part of standard payment options. Cryptocurrency debit cards can help you bring digital currency to everyday transactions, but make sure you consider their costs, among other important things, before getting your hands on one.
Read more about Crypto ATMs:
Crypto ATMs: How Do They Work and How Are They Different from Fiat ATMs?