What are crypto debit cards? How do crypto debit cards work? On this page, we give you extensive research on crypto debit cards and what you need to know about them.
Since the development of Bitcoin, many other cryptos have come up, and some have gained tremendous popularity. These include Ethereum and Ripple.
At the same time, the number of crypto users has grown significantly within a decade. In fact, according to Triple-A, a company that focuses on blockchain and crypto solutions, the number of crypto users is now over 300 million.
Even better, many other crypto experts expect this number to hit a billion mark before the end of 2022.
Due to this significant growth of crypto and its users, the need to make crypto payment tools has been overwhelming. Thus the rise of numerous crypto debit cards.
Crypto exchange platforms have been on the front line for providing these convenient tools. Besides crypto exchanges, membership clubs like Club Swan and payment providers also issue them.
What Are Crypto Debit Cards?
Crypto debit cards are debit cards that can receive funds from crypto wallets. These cards work so much similar to traditional debit cards.
In fact, to make purchases, all you need is to swipe your card or insert your card details. In short, these cards make it easier and more convenient to use crypto for daily purchases.
Also, you can define them as cards issued by crypto organizations to make crypto spending more convenient.
How do Crypto Debit Cards Work?
Different crypto debit cards operate differently. Yet merchants receive your payment as fiat whenever you use these debit cards.
On the one hand, we have crypto debit cards that you must fund manually. First, you have to visit your portal/app to sell your preferred crypto. After a successful crypto selling, you receive your fiat, which you can use to fund your crypto debit card.
Apart from manually funded cards, there are cards with automated crypto conversions. These cards can load crypto from the account and convert it to fiat during payments.
Besides time for crypto conversion, crypto debit cards also vary depending on the process of crypto transactions.
The three types of crypto debit card transactions are:
This is the most common type of transaction process among crypto debit cards. These debit cards convert your crypto directly to fiat.
To convert the crypto to fiat, you have to first sell the crypto to the platform provided. Here, you get the equivalent fiat for your crypto at the prevailing market price.
More importantly, you can choose the fiat you to convert to during the exchange.
Once the exchange is successful, the fiat gets deposited into your account. From here, you can use the fiat to fund your crypto debit card.
Club Swan is a good example of these crypto debit cards.
For crypto debit cards that fall here, you’ve to convert your crypto to stablecoins first. Then you can exchange the stablecoins for fiat when the need for making a payment arises.
For example, Crypto.com users can sell their crypto for USDC on Coinbase. After the exchange, you can transfer the tokens to your registered Crypto.com account. When the need for making payments comes up, you can sell the USDC coins for fiat.
Different from regular cryptocurrencies, stablecoins are immune to crypto volatility. Thus, they can maintain a 1:1 ratio with fiat even when crushing the crypto market.
In this category, you have first to exchange the crypto for stablecoins. Any other process after this is automatic, thanks to the system.
When using these cards, you might think you use stablecoins for payments. However, during transactions, the stablecoins get converted to fiat automatically.
A Coinbase debit card is a good example. Coinbase first converts your crypto to USDC (USD Coin), a popular stablecoin. During this time, the USD coins remain at the ratio of 1:1 to the US dollar.
However, note that to convert to USDC, you must use old Bitcoin or any supported crypto by the company.
What are the Benefits of a Crypto Debit Card?
1. Highly Convenient
Sometimes back, crypto investors find it hectic to use crypto as a payment method. But with the introduction of crypto debit cards, it has been extremely easy to spend crypto.
This means that you don’t have to follow the long-outdated processes for making crypto payments.
2. Simple to Use
You might think making payments with crypto debit cards is a hassle. However, this is the complete opposite.
Using crypto debit cards is like using regular debit cards. All you need is to enter your card details for online purchases. Also, swipe it when making in-store payments.
Also, most card issuers provide you with a virtual card to make your online transactions seamless and secure.
Furthermore, some cryptocurrencies take a long time to confirm. Therefore, card issuers might cover your payments in case of such an event.
The issuers deduct the same amount from your crypto balance when the confirmation is over.
This allows continuous and daily use of crypto.
3. Highly Flexible
How are crypto debit cards flexible?
Most of these debit cards can support multiple cryptocurrencies. For instance, the Crypto.com Visa cards can support up to 90 different cryptocurrencies. Meanwhile, a Club Swan MasterCard can support up to nine cryptocurrencies.
Even better, some cards support altcoins, stablecoins, and even fiat currencies. For example, besides cryptocurrencies, Club Swan cards can support EUR, GBP, and USD.
Due to this wide range of options, you get the utmost flexibility depending on your situation.
Also, most of these cards have support from payment processors, Visa and MasterCard. This means that you can make purchases and ATM withdrawals from almost everywhere in the world with this card.
4. Highly Versatile
Unlike fiat currency, cryptocurrency can easily withstand economic instability faced in various countries. In short, manipulating crypto isn’t as easy as manipulating traditional currency.
So crypto continues to maintain its value despite foreign transactions and currency conversions.
For instance, Venezuela, which is facing economic instability, uses hard currencies like EUR and USD. On top of that, most Venezuelans have reverted to using crypto, mainly Bitcoin, to withstand inflation.
5. Improved Security
Lately, there has been a tremendous increase in crypto scams. Thus, crypto card issuers have improved the security associated with cards.
Some of the top-notch security measures adopted by crypto cards are 2FA, passcodes, and biometrics. In fact, most crypto card issuers have integrated these measures into their apps and portals.
Also, on these apps/portals, you can remotely control the security of your card. For instance, on this app/portal, you can change a card’s PIN or freeze it. Additionally, you can report the loss of your card here.
What are the Crypto Debit Card Cons?
1. Possibility of Owing Fees
To fund your crypto debit card, you must sell your crypto. During this event, you may trigger a taxable loss or gain.
According to IRS (Internal Revenue Service), crypto is property, specifically crypto assets. This puts crypto in the same category as stocks and bonds. So for any capital gains, you must pay taxes.
Factors affecting the amount of capital gain tax you pay are profit and the period of holding the crypto.
2. Possibility of High Fees
Different cards charge different kinds of fees. However, for some cards, you might be on a hook for extremely high fees.
These fees might include inactivity fees, transaction fees, foreign exchange fees, transaction fees, and more.
3. Internationally not Acceptable
Despite some cards getting support from processing companies, they aren’t internationally varied. This means some cards might fail to work in some geographical locations.
Therefore, you might not make purchases nor ATM withdrawals when in some regions.
4. No Rewards for Some Purchases
You’re wrong if you think crypto debit cards offer cashback for every purchase you make.
Most crypto issuers only allow specified purchases which you can get cashback from. For instance, Crypto.com doesn’t offer cashback if you make purchases of graphics with the card.
5. Using Crypto Held in a Different Company is Expensive
For instance, let’s say you have a Club Swan card, and you hold crypto in a coinbase wallet. Funding your Club Swan card with a Coinbase wallet is almost impossible. At the same time, transferring the crypto to the Club Swan wallet will cost you a pretty high fee.
Crypto debit cards are relatively new in the crypto market. However, these cards have tremendous potential with significant crypto adoption. So with the tremendous application for these cards, there is a high need to acquire more knowledge about them.