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What You Should Know About Crypto Debit Cards | Banking Advice

If you invest in Bitcoin, Ethereum, Dogecoin or any other number CryptocurrencyYou may want to spend some of your possessions. Crypto debit cards are a tool that can make it easier for consumers to use cryptocurrency with merchants who do not accept their cryptocurrency directly.

But be sure to read all the fine print before opening the card. Companies may advertise reward programs or say they have low fees, “but they don’t advertise all the other things you get penalized or paid for,” says Merav Ozer, a blockchain expert and professor of financial technology at Rutgers Business School.

How do Crypto debit cards work?

When you make a purchase with a crypto debit card, the merchant receives payment in fiat currency, which is a government-issued currency such as the US dollar. While regular debit cards are linked to bank accounts, many crypto debit cards are linked Prepaid cards that you may be able to fund using Cryptocurrency wallet.

If you fund your card with cryptocurrency, the exact way your money moves from cryptocurrency to dollars will depend on your card. You may be able to hold your currency in crypto form until you start buying, or you may need to convert your cryptocurrency to dollars beforehand.

The cryptocurrency you can use to fund your card also depends on your debit card. The Voyager Debit Mastercard, for example, allows you to spend USD Coin, a currency pegged to the value of the US dollar, while the Visa Crypto.com card accepts 23 cryptocurrencies, including Bitcoin, Litecoin and Ethereum.

What are the pros and cons of using a crypto debit card?

Cryptocurrency investors can do many things with their cryptocurrency. Make sure to weigh the pros and cons of crypto debit cards before opening one.

  • You can earn rewards. When you spend with your crypto debit card, you can earn a percentage of cryptocurrency. Keep in mind that you may have to hold, or “bet,” a certain amount and type of cryptocurrency to be eligible for rewards. In all cases, make sure the rewards are worth any fees that may be attached. “You have to calculate,” Osiris says. “(Do) the rewards really outweigh the cost to me, and the fees? Because the fees are so exorbitant.”
  • Ease or convenience. If you want to spend your cryptocurrency in everyday life, crypto debit cards are one way to convert your coins into cash. Crypto debit cards may also allow users to make ATM withdrawals and receive direct deposits.

  • Possibly high fees. Depending on your card, you may be in trouble about transaction fees, inactivity fees, actual card fees, and more. With Coinbase, for example, you will be charged a transaction fee of 2.49% when you use your debit card with any cryptocurrency besides USDC.
  • Using cryptocurrencies that you own with a different company can be expensive. If you have a BitPay card, for example, you won’t be able to use it to spend the bitcoins you own in your Coinbase wallet unless you transfer your Bitcoin to your Bitpay wallet first — and the process comes with a fee.
  • You can owe taxes. When you sell cryptocurrency to fund your debit card, it may result in a taxable profit or loss. And while regular credit or debit card rewards aren’t taxed, it’s unclear if the same applies to rewards from crypto debit cards. “I advise people to be careful and educate themselves about the tax implications when it comes to these credit and debit cards before they start their own business and buy 10 pizzas, six lattes, a stereo and whatever else you do with a crypto debit or credit card,” says Myshkin Santa, International Tax Director and Partner at The Wolf Group, a tax advisory firm.

Consumers should plan to track their cryptocurrency income and losses for their tax returns. You don’t necessarily have to create a file 1099But you have to create something equivalent to it, says Santa, “If you can’t prove transactions, you lose out if it comes to an IRS audit.”

How do you choose a Crypto debit card?

If you already have cryptocurrency in the wallet of a company, it will probably be more convenient to open a crypto debit card with that company. But not all companies offering crypto wallets issue crypto debit cards in the US, or the cards may only be available to some customers.

If you have crypto wallets with several providers that also offer crypto debit cards, you can compare reward programs. Many crypto debit cards offer crypto rewards, but the amount and type of crypto you earn varies by card.

With a Crypto.com Visa Card, for example, rewards come as Crypto.com or CRO currency. You can earn 1% CRO Rewards with the lowest denomination of the card, which is available to users who have owned and held CRO codes for at least 180 days. The maximum bonus level is 8%, but you will have to share at least $400,000 in CRO with Crypto.com for at least six months to qualify – which is a huge demand.

In return, Coinbase Card offers up to 4% of the digital assets selected by the user. Note that Coinbase currently has a waiting list for its debit card.

You shouldn’t just look at the rewards. Also compare fees and other card terms to make sure the product is worth it.

Even if you only have one crypto debit card option, you may have a choice between funding your card with an extension stablecoin Or a more volatile origin. If you use a coin backed by US dollars, you won’t usually encounter the same tax problems when you sell your crypto to use your card, says Santa.

Or your card may make the choice for you. Voyager Digital is launching a crypto debit card based on USDC in part to avoid putting users “in an uncomfortable tax situation,” says Stephen Ehrlich, CEO of Voyager Digital.

Should you get a coded debit card?

Whether you should get a crypto debit card depends on factors such as your crypto investments, whether the card you are considering is worth its fees and other requirements.

If you are looking for a way to convert your cryptocurrency into cash, a crypto debit card might make sense for you. But the debit card is not the only product that makes it easy to spend cryptocurrency. Alternatives include Crypto Credit Cards And pay with Crypto from PayPal.

And if you’re just looking for a way to learn more about cryptocurrencies, Ozair recommends owning a crypto wallet and trying it out instead of opening a crypto debit or credit card.

“If you want to experiment, try all kinds of other apps offered by all kinds of apps DeFi“, as you say.

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