You'll soon be able to apply for credit cards that earn Bitcoin rewards. Is this the future of credit card rewards or a flash in the pan?
Right now, there are several different flavors of credit card rewards available. You can earn cash back. You can earn travel rewards for free trips. You can earn points towards free merchandise. Some rewards credit cards even give you all three of those options.
But to date, no credit card has given you the option to earn rewards in Bitcoin or any other cryptocurrency. That's about to change, as two new credit cards that earn Bitcoin rewards are expected to launch this year.
Given the massive price jumps Bitcoin has seen in recent years, being able to earn it through credit card rewards is exciting news. The value of Bitcoin can both increase and decrease. As such, it's the first type of credit card reward that can potentially become much more valuable. If you're interested in being an early Bitcoin credit card adopter, it's a good idea to know how both Bitcoin and these credit cards will work.
A quick introduction to Bitcoin
If you're unfamiliar with Bitcoin, it's the most popular type of cryptocurrency. A cryptocurrency is a type of currency that only exists digitally. All transactions, including the creation of new coins, are recorded in a database using cryptography -- hence the name.
The short version is that it's digital money. For the typical consumer, what's most notable is its volatility. Cryptocurrencies have gone through several extreme ups and downs in value, and Bitcoin has led the pack.
Ten years ago, you could get it for a dollar. Near the end of 2017, it was worth almost $20,000, then the value plummeted. In just the last month, prices have risen from about $33,000 per Bitcoin to $55,000. Depending on your luck, you could make or lose a lot of money with Bitcoin.
The upcoming Bitcoin rewards credit cards
Two Bitcoin credit cards have been announced: the Bitcoin Rewards Credit Card by BlockFi and the Gemini Credit Card.
BlockFi's Bitcoin Rewards Credit Card
BlockFi and Visa have partnered up for the Bitcoin Rewards Credit Card, expected to launch in the spring. Here are the details that have been released so far:
- 1.5% back in Bitcoin rewards on purchases
- $250 in Bitcoin rewards as a sign-up bonus after you spend $3,000 in the first three months
- $200 annual fee (yikes!)
The way its Bitcoin rewards work is that you earn 1.5% cash back on purchases. That cash back is automatically converted to Bitcoin.
There's one glaring problem. A $200 annual fee is insane on a card that earns 1.5% back. Quite a few no-annual-fee credit cards earn 1.5% back on purchases. Some even earn more, and again, they don't cost you a thing.
Maybe the Bitcoin Rewards Credit Card will have other benefits that make up for the annual fee. You'd think BlockFi would lead with the best features, though. As it stands, this looks like a card that costs too much just because it has the word "Bitcoin" in its name.
Gemini Credit Card
There's very little information available about the Gemini Credit Card. The expected launch is this year. It will earn up to 3% back on purchases, and you can earn rewards in Bitcoin or other cryptocurrencies. There won't be any exchange fees on cryptocurrency rewards.
We'll know more about how the Gemini Credit Card compares to other credit cards when more details have been released. Especially the annual fee and rewards rate. Up to 3% back looks good at a glance. But it will depend on how exactly you earn that rewards rate.
Should you apply for a credit card with crypto rewards?
Crypto credit cards certainly sound interesting. But to be worth getting, they need to offer competitive features besides earning Bitcoin (or other cryptocurrency) rewards. Before considering a credit card with Bitcoin rewards, you should see how it stacks up to the best credit cards in terms of its annual fee, rewards rate, and other benefits.
Ultimately there's nothing particularly special about earning Bitcoin rewards over cash back.
That's because you could get a cash back credit card, and simply invest the cash back into cryptocurrencies. It wouldn't be automatic, but it would work all the same.
The appeal of crypto credit cards is understandable. No other type of credit card reward has the potential to rise in value like cryptocurrencies. A $500 balance of cash back is never going to randomly be worth $800 because of a price spike, but Bitcoin has seen increases like that. Just remember that those dramatic price swings can go both ways, which is a problem you typically wouldn't have with other credit card rewards.
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