3 Things to Know Before Switching to Crypto Credit Cards

Posted on June 15, 2022Comments Off on 3 Things to Know Before Switching to Crypto Credit Cards

If you’ve only got a surface level of familiarity with cryptocurrencies and the technologies that they’re based on, you might be surprised to learn that there is a lot of cross-pollination with more traditional financial products.

Crypto-linked credit cards are a great example of this, bringing you the benefits of a standard payment card linked with the perks of expanding your crypto portfolio.

Let’s look at what a crypto credit card is and what other important aspects you need to consider before you go ahead and sign up for one of your own.

What is a crypto credit card?

The first point to get to grips with is that there are a lot of fundamental similarities between something like the SoFi crypto credit card and an equivalent credit card from a traditional provider.

The main difference is that while you’ll be paying for goods and services using fiat currency and making repayments in the same way, the rewards you’ll earn will be crypto-based.

So, for example, if a crypto credit card gives you cash back on purchases, this can be redeemed as the crypto of your choice rather than as a fiat currency payment.

Each crypto credit card has its own features, perks, and token compatibility, so be sure to check the small print before you sign up.  But the idea here is that your credit card can be tied to your enthusiasm for crypto, unlike any comparable package found elsewhere.

There are questions to ask before you take on any financial product, and comparing crypto credit cards to get the best deal obviously makes sense.  Don’t just get lured by the promise of plentiful incentives, but also check the reputation of the provider and look into any fees and charges which are involved.

Interest applies but can be reduced.

Because crypto credit cards adhere to the same framework and business model as standard credit cards, expect to pay interest on your balance over the course of the year.  The level of interest you’re charged will depend on your circumstances, your past repayment history, and other factors that are worth looking into.

If you make purchases and then pay them off immediately, you’ll limit the amount of interest you pay.  And, of course, if you miss a repayment, your credit score will suffer, and there could be other penalties to pay.

Likewise, any crypto you earn through the incentive schemes attached to credit cards will be subject to the same tax rules as any other asset you hold.  With increased regulatory pressure on crypto investors being exerted at the moment, taking tax seriously is sensible, and so you might not just be able to treat your rewards as ‘free’ money in this context.

Well-known payment networks are used.

You might be concerned that a crypto credit card would exist outside the infrastructure which you’re familiar with and thus come with more risks from a security perspective.

The good news is that this isn’t the case, and you’ll find that every card on the market is backed by one of the mainstream payment networks we all rely upon daily.

The likes of Visa and Mastercard are the best-represented brands in this space, and that also means you’ve got the same protections as a customer as you would have when using a standard credit card.  For example, you can use chargebacks to recover cash if your card is cloned or used fraudulently by a third party.

The upshot of all this is that crypto credit cards are easy to recommend, so long as you trust the provider itself and compare packages to get a good deal.

Source link

Comments Off on 3 Things to Know Before Switching to Crypto Credit Cards