Cryptocurrency is a hard thing to avoid in this day and age. What was once a curiosity has now become a full-blown industry that has ramifications on the financial world. We have become used to debit cards becoming part of our life, and now cryptocurrency is moving into that space as well.
Before you go running out to get a crypto debit card, however, it is vital to know what you’re walking into. There is a lot more than meets the eye when it comes to having one, using it, and making the most of getting involved in crypto debit cards.
Fees and Hidden Costs
While most of the crypto news out there tells us about the price of each coin, there is a lot more to unpack when it comes to taking out a crypto debit card. For instance, what kind of fees and hidden costs are you going to run into?
Cards can advertise themselves as “zero fees,” but there are things like conversion spreads that can get you. This is the difference between the market price of crypto and the rate that the financial institution uses to convert it. That’s not even mentioning transaction fees, card issuance fees, withdrawal fees, and more.
Custody Risks
One of the hallmarks of crypto is that it has the capacity to be safer than more traditional methods of finance. That said, not being properly educated before getting involved can lead you into the same issues that the traditional finance world faces.
For instance, loss of private keys can still happen. When you use a crypto debit card, it is pulling from the digital platform or exchange holding the digital assets. Should the company freeze your account or experience a security risk, you run the risk of losing the funds tied to the debit card.
Staking and Rewards Requirements
A big draw to the world of crypto is the ability to get involved in staking. This is a way to make passive income and is often one of the biggest rewards for using a certain cryptocurrency platform. Just be aware that there are specifications and requirements to be aware of.
Many cards offer a certain percentage of cash back when using crypto. Make sure to read the fine print because it will usually require you to stake – or lock up – a certain amount within that platform’s native utility token, often for a set period. Don’t just jump at the cash back offer without reading the fine print involved.
Conversions
This is an important one. Some cards will automatically sell the crypto from your account, in much the same way a fiat currency (like U.S. dollars) works. Some cards are prepaid, which means that you load or sell crypto into a stablecoin or cash before the balance is added to your card.
Keep this in mind. There are often fees attached (see above), so you need to be aware of how much of your crypto is moving to the card. It likely won’t be all that much but you can prevent yourself from doing a double-take when seeing the difference between transfers.
Explore the Brave New World Intelligently
Crypto cannot be ignored anymore but that doesn’t mean that you have to jump in with both feet. Take the time to educate yourself on the ins and outs of a crypto debit card, how it could be effective in your life, and what kind of fees, tax implications, etc. could impact you. When all is said and done, you can feel confident using a crypto debit card in your financial life.
