- A new direct deposit service from Coinbase has some nifty features to coax individuals into the cryptocurrency space. The coolest is that you can pick the percentage of your paycheck you want allocated to any of the cryptos it offers and keep the rest in U.S. dollars if you want.
- As long as you keep your account credentials safe, digital assets on the platform are insured. Your cash deposits are moved off Coinbase into traditional banks that are FDIC insured.
- If you choose to get paid in certain cryptos such as stablecoin Dai (DAI) or Algorand (ALGO) you automatically earn 4% interest on those deposits.
- You have to be a U.S. resident not living in Hawaii to participate, and it takes up to three pay cycles to kick in.
If you're not sure how to get into crypto, Coinbase just made it easy.
I recently received an email from Coinbase about its new direct deposit program, which I didn't know existed -- and you probably didn't either. While brushing up on Coinbase's new advertised feature, I saw some interesting things about this unique foray into cryptocurrencies that might be useful to anyone interested in entering (or diving deeper) into the world of crypto.
You control how much or how little of your paycheck to convert to crypto
The newly launched direct deposit feature allows eligible users to transfer a portion of their paycheck -- or the entire amount -- to their respective Coinbase account. To use this service, you must be a U.S. resident living in any state except Hawaii. Program participants can determine if their paycheck will be deposited as U.S. dollars or converted into an available crypto asset of their choice in their respective crypto wallets.
There are no fees for that initial deposit and salary conversion to crypto. Coinbase doesn't disclose flat transaction fees. It instead has this policy, which states:
"Fees are calculated at the time you place your order and may be determined by a combination of factors including the selected payment method, the size of the order, and market conditions such as volatility and liquidity."
The opaque Coinbase fee structure can be frustrating. To provide context for you, I've personally paid 1%-4% of various transaction totals in fees. Regardless, the initial salary conversion is fee-free, any trades or conversions to other cryptocurrencies will thrust you into the mysterious fee fog.
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Coinbase deposits are insured
Security is a big issue for cryptocurrency investors and holders -- and rightly so. It's not common within the space to see a crypto exchange that insures the deposits of investors, but Coinbase does -- and they should be applauded for it. On its website, Coinbase states that it carries crime insurance that protects a "portion" of digital assets held across its storage systems against losses from theft, hacks, and cyber attack. While they don't define how much a "portion" is, something is better than nothing when it comes to insurance in the crypto game.
Coinbase does not however cover any losses resulting from unauthorized access or personal mismanagement of your Coinbase or Coinbase Advanced Trade account(s) due to a breach or loss of your credentials. That's on you. As with any financial accounts, strong security hygiene practices are required for any login and passwords. As a reminder, digital currencies are not legal tender in the U.S. and are not backed by the government, so you're responsible to protect your account credentials.
Interestingly, if part of your direct deposit calculus includes keeping a portion of the funds in U.S. dollars, those specific funds are moved off Coinbase into traditional banks, where they are in fact insured by the FDIC.
Instantly converting paycheck deposits into certain cryptos produces 4% returns
According to the Coinbase website, If you choose to get paid in certain cryptos such as stablecoin Dai (DAI) or Algorand (ALGO) you automatically begin earning 4% interest on those deposits -- that's almost like getting a 4% raise.
According to Bankrate.com the current annual percentage yields on savings accounts range from 0.01%-0.60% -- which is downright anemic by comparison to the crypto yields.
The last bit of information you should know is that Coinbase states that once you sign up for its direct deposit program, it could take up to three pay cycles for it to take effect. If you're looking for an easy, low-risk way to dip into crypto, this might be an option worth exploring.
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