The crypto ecosystem has evolved significantly since Satoshi Nakamoto first introduced Bitcoin to the world. What started as a groundbreaking concept has now grown into a mature and sophisticated industry offering services and products that rival those of the traditional financial system. Just a few months ago, the U.S. Securities and Exchange Commission approved the first Bitcoin Exchange Traded Funds (ETFs), further legitimizing the sector and attracting institutional investors to the space.
However, beyond that, crypto companies have gone further to issue crypto debit and credit cards. Up till now, you only got cards issued by traditional banks and credit card companies and typically denominated in Dollars. Now, you can get similar cards, denominated in crypto, and issued by crypto companies.
In this article, we will discuss what these crypto cards are, what you need to know, and how they are different from regular TradFi cards.
How Crypto Cards Work?
In the past, if you wanted to spend some of your cryptos, you would have to exchange it for fiat currency, either through a peer-to-peer transaction or through a crypto exchange. Then, the fiat money has to be withdrawn from the exchange and deposited in your bank account. Obviously, this was not a very efficient system, and would typically take a couple of hours, or even days, to run completely. Pretty inconvenient, when you need to make a purchase immediately.
Well, enter crypto cards – actual cards issued by crypto companies, in partnership with the usual card solutions providers — Mastercard, Visa, etc. With these cards, you can now make purchases at any retail front, whether or not they accept cryptocurrencies. You can also make fiat withdrawals, using these crypto cards, at select ATMs.
So, how would it work? Well, traditionally, with regular cards, when you swipe your Mastercard at a JCPenney, Mastercard takes the money from your bank account and sends it to the seller. It's as straightforward as that. With the crypto cards, there is just one added step. The card provider – Mastercard or Visa – takes the equivalent of the cost of the purchase from the crypto wallet attached to the card, converts it to fiat, and then sends it to the seller.
Some of the crypto cards even go further to offer reward points and other benefits, just like regular fiat money cards.
What to Consider?
Just like you would with regular fiat money cards, there are factors that you need to consider before choosing a preferred crypto card. Here are three of them:
What are the Fees?
Visa (and the other card providers) does a lot of the heavy lifting in enabling transactions, and for that, they typically charge reasonable transaction fees. There may be deposit fees, withdrawal fees, or any other type of fee. These fees typically have thresholds, patterned after transaction volume, that can either drop fees to zero or increase them.
You just need to keep an eye out when signing up for a crypto card, and read the terms and conditions, to be entirely sure that you understand the fee structure, and that you are satisfied with it.
What Cryptos Does it Support?
Well, there are a thousand and one tokens in the crypto ecosystem, and it is next to impossible for a card provider to enable transactions in all of them, so they typically provide support to only a select few. So, before you even step out to swipe that shiny new crypto card, you want to be absolutely sure that the card provider supports your crypto token of choice. If not, you may want to swap it for a more widely known token like Bitcoin or Ethereum. Thankfully, that usually would not take as long as exchanging crypto for fiat.
Is the Service Supported for Your Location?
In theory, crypto cards should work anywhere. However, given the reality of regulatory control, the crypto card service may not be available in regions with hostile crypto regulations. So, if you’re in the USA, your crypto card will very likely work anywhere. But don’t expect it to when you travel, to say… China, for example.
Debit Cards or Credit Cards
Just like it is with regular fiat cards, you can choose to get crypto debit cards or crypto credit cards. The mechanics are almost the same as you are used to, and you just need to make a choice, based on your personal preferences. Here, we will explain how each one works, just to help you understand better
Credit Cards
It is a pretty straightforward process. Credit cards allow you to purchase items on credit, for which you are then required to make a monthly payment. How well you keep up with these payments then goes on to contribute to determining your credit score. You have to keep in mind that while credit cards allow you to buy things with credit, you must always stay within the realm of reason, and only buy things that you can afford to pay for so that your fees don’t wind out of control.
Debit Cards
Debit cards are even more straightforward. They simply take out of money that you already have; so you don't have to worry about making any future payments. Every transaction simply takes out the equivalent amount of crypto, along with the transaction fees. All you have to do is to connect the card to an active and funded crypto wallet.
How Crypto Cards are Changing Finance?
Before now, crypto majorly was a way to store value, and maybe conduct huge transactions. Traditional finance maintained a tight grip on consumer finance. However, with the introduction of crypto cards, we can begin to see all the advantages of crypto filters in consumer finance.
For example, there is the borderlessness of crypto transactions. While your BoA card may not be of much help when you travel to say… Africa, nothing prevents your crypto card from working as normal, with any standard point of sales terminal, provided that there is no specific anti-crypto regulation in that jurisdiction. There is also speed, lower costs, and better anonymity, among so many others.
