Why Crypto Rewards Credit Card Is Probably a Bad Idea
With the help of cryptocurrency reward cards, a small percentage of your purchases can be exchanged for cryptocurrency instead of refunding money or points on the reward portal. But the fact that you can combine rewards credit card to gamble cryptocurrency, does not mean that you should do it because it is less risky cashback payments can offer you a lot of value in the long term.
What do I need to know about cryptocurrency reward programs?
Most cards offer flat rates of 1–2% per purchase, while others offer variable rates based on expense categories. Since many kriptobirzhi offer these cards ( SoFi-, Gemini in, BlockFi ) in partnership with MasterCard or Visa, cryptocurrency usually deposited into the account on these exchanges. But while it is true that cryptocurrency could have potentially astronomical value if it eventually replaces fiat currency – as many enthusiasts believe – it is still a very speculative long-term bet.
Due to the volatility of the cryptocurrency, the high speculative value and the thousands of competing blockchain currencies to choose from, there is no guarantee that any given cryptocurrency will have long-term value. Before signing up for a cryptocurrency reward card, ask yourself the following considerations.
- Reward Cost: Cryptocurrencies tend to fluctuate a lot ( price fluctuations of 10-15% per day are not uncommon), so there is no way to predict what your accumulated income might be in the future. Even if you plan to keep your rewards, it is also possible that this cryptocurrency will be worth zero dollars. You will also want to check for additional fees associated with exchanging cryptocurrencies for cash as they can reduce the value of your rewards.
- Reward Options: While some crypto cards do offer redeemable cash out loans and other rewards, they tend to be limited in terms of what you can redeem compared to regular bonus cards that offer higher cash back rates. And despite the odd exception, most vendors don’t accept crypto, so actually buying something with it (if that’s what you wanted to do with it) is difficult.
- No Choice: Some cards offer multiple currencies to choose from, but most simply offer Bitcoin or Ethereum, further limiting the flexibility of your rewards. If, say, Dogecoin becomes king and these currencies end up dropping for any reason, you are left with the bag.
- Taxes: Whenever you cash out a cryptocurrency that becomes more expensive in value, you must pay capital gains tax. Even if you are only charged a low capital tax rate of 10%, this is still a significant part of the change for any amount of money converted from cryptocurrencies. On the other hand, recurring cash-back awards are considered an IRS rebate and are therefore not taxable.
Bottom line
There is nothing wrong with investing some money in cryptocurrency , but you can just deal with exchanges directly. They will offer you more options and you can make a one-time purchase rather than subscribe to what is essentially a cryptocurrency subscription service through your credit card.
Plus, bonus cards already offer guaranteed instant cash benefits, even if it’s only $ 30 per month, depending on your spending habits. It may not have the potential to grow by 1000%, but it won’t even have 0%.