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This article is a part of IOV Labs’ series focused on helping newcomers to the world of Web3 understand the value of decentralized finance. Read on to explore why crypto credit cards are an important tool to facilitate payments and increase financial inclusion, and learn about some available options in the market.  

Bridging the gap between digital currencies and traditional financial systems — this is the challenge that has plagued the crypto space since its inception. Many people hold cryptocurrencies but find them impractical for everyday transactions. And on the other side, merchants don’t want to accept crypto due to its volatility and added levels of complexity.

The most promising solution to this issue? Crypto credit cards. Over $2.5 Billion in payments were made with VISA crypto-linked cards in its first quarter of 2022 (up 70% from 2021). Crypto credit cards, and the rewards they offer, are becoming an increasingly attractive option for both consumers and merchants alike. 

In this article, we’ll delve into crypto credit cards, taking a closer look at how they work, their unique advantages, and some of the key providers leading the way. 

And if you want to learn about crypto-based lending solutions, read our in-depth report.

Download The Report on The Rise of Digital Lending in LATAM

What is a Crypto Credit Card and How Does It Work?

A crypto credit card functions like a traditional credit card from a user’s perspective. However, instead of drawing from a bank account or a credit line, a crypto credit card uses cryptocurrency as its source of funds. 

When you make a transaction using a crypto credit card, the card automatically converts the cryptocurrency into local fiat currency. This allows the cardholder to make payments anywhere regular credit or debit cards (e.g., Visa and Mastercard) are accepted. The conversion rates are based on the real-time market value of the cryptocurrency being used.

Depending on the crypto credit card provider, it is possible to utilize a variety of cryptocurrencies when making a purchase. You can choose your own preferred crypto to pay with — adding an additional layer of flexibility.

What Are The Benefits of Crypto Credit Cards?

Crypto credit cards extend beyond being a novel way of utilizing cryptocurrencies. They offer several tangible benefits and advantages:

Convenience in Everyday Transactions

Crypto credit cards enable users to spend their cryptocurrency holdings directly without needing to swap crypto to fiat or calculate the conversion rate when making a purchase. 

Crypto credit cards draw directly from the cryptocurrency wallet and seamlessly convert it into the local currency at the point of sale. The retailer receives the appropriate amount in fiat, and you pay in crypto — just by tapping your card. 

Rewarding Cashback Programs

Many crypto credit card issuers offer rewards — sometimes paying out up to 8% of the transaction value in the form of crypto cashback. This cashback (or “cryptoback”) is usually credited in Bitcoin or the issuer’s native token. It provides an automatic method for cardholders to accumulate more cryptocurrency.

Financial Inclusion

Crypto credit cards provide underbanked populations with the opportunity to access traditional financial services benefits without the need for a bank account. For instance, users who start relying on crypto credit cards can build credit history and qualify for crypto loans. They can also have cheaper and faster payment experiences with businesses that accept crypto payments

Thus, crypto credit cards allow those previously excluded from the financial system to participate more fully in the economy.

Facilitates International Transactions

Cryptocurrencies are borderless by nature, and crypto credit cards align with this characteristic. They allow users to spend their digital assets anywhere in the world. Crypto credit cards offer competitive fees when compared to traditional credit cards — making them an attractive option for those sending money overseas and frequent travelers.

Top Crypto Credit Card Providers

Several crypto credit providers have emerged as leaders in the space — each with unique offerings tailored to cater to different user needs. Some of the leading crypto credit card providers include:

Coinbase: One of the largest cryptocurrency exchanges globally, Coinbase offers its users a Visa crypto credit card. The card allows users to spend crypto directly from their Coinbase accounts and earn up to 4% back in crypto rewards on purchases.

Crypto.com: Crypto.com offers a range of crypto cards with different tier levels. Their rewards range from 1% to 8% in CRO (Crypto.com’s native coin) on all purchases. The top-tier cards also gain perks such as free Spotify, Netflix, Amazon Prime, and access to airport lounges.

Nexo: Nexo utilizes DeFi lending and borrowing services to allow cardholders to use their cryptocurrency as collateral when making purchases. This model allows users to spend without selling their assets or triggering a taxable event. 

Wirex: Supports over 250 cryptocurrencies on their crypto card. Their rewards system allows users to earn anywhere from 1% to 8% cryptoback on every card transaction.

Choosing the right provider ultimately comes down to user preference. Things like a user’s favored cryptocurrency, spending habits, and desired rewards/benefits all come into play. As the market matures, we expect more competitors to offer increasingly tailored and competitive services.

Where Are Crypto Credit Cards Accepted?

Crypto credit cards are accepted almost everywhere. All major crypto card providers are integrated with either VISA or Mastercard (or both). So you can use your crypto credit card anywhere that accepts traditional credit/debit cards.

While the acceptance of crypto cards is universal, certain retailers are embracing their use by offering exclusive benefits to cardholders. For instance, Amazon Prime offers a 100% reimbursement on their membership to Crypto.com users (top tier). Other subscription services like Netflix and Spotify, and even travel platforms like Airbnb and Expedia, have introduced similar benefits to crypto card users.

We’re still waiting for the day when these big-name retailers accept cryptocurrency directly. But these indirect methods demonstrate a meaningful step forward in the adoption of cryptocurrencies into our daily lives. It’s a clear sign that prominent global companies are open to adapting and embracing the changing financial landscape.

What Next?

As the financial ecosystem continues to evolve, the adoption and integration of crypto assets is becoming increasingly important. Crypto credit cards represent a significant step towards bringing together the flexibility of cryptocurrency and the convenience of traditional finance. 

For a deeper understanding of the rapidly evolving crypto landscape, including developments in crypto credit cards, check out the RIF Lending Report. This comprehensive guide will provide you with insights into the future of decentralized finance and its potential impacts on traditional financial systems.

Download The Report on The Rise of Digital Lending in LATAM

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