It’s becoming more common to use crypto credit cards in routine spending, although average crypto payments are often larger than traditional retail purchases (as per a Trading View report).
Despite the similarities, crypto and traditional credit cards work differently in terms of fees, consumer protections, rewards, credit-building, and financial risk – in other words, they work differently in just about every conceivable way. So which is better for everyday spending?
Convenience and acceptance
Traditional credit cards (Visa, Mastercard, American Express, etc.) have an advantage in that they’re accepted by millions of merchants. But the growing acceptance of crypto means that the two worlds are converging.
Crypto credit cards can offer a similar checkout experience. In many cases, customers can use a crypto card at participating merchants just as they would use a traditional card, without needing to understand how cryptocurrency transactions work. A crypto credit card makes it possible to spend stablecoins including USDT, XRP, Bitcoin, Ethereum at more than 150 million stores across the world.
Certain crypto credit cards can be added to Apple Pay or Google Pay, and can either be connected to a wallet or topped up with stablecoins. Stablecoins means that these cards can be used at supermarkets and convenience stores, as well as for food delivery, paying for rides, traveling, and online shopping.
Many customers, of course, are familiar with the underlying technology and using crypto wallets. Intuitive payment platforms (as well as crypto communities) have helped shift an early perception that crypto was only suitable for tech-savvy people.
Spending flexibility
Traditional credit cards offer more flexibility in terms of larger expenses and lending. Some cards offer introductory interest rates and/or balance transfer. These can provide more short-term flexibility, but should be used carefully.
Crypto cards offer similar functions in some cases, but their value is closely tied to their features of the issuer’s platform. Limits, assets, withdrawal options, and rules around rewards can vary greatly.
In short, consumers need to check the terms carefully, which is good general advice for dealing with any financial service.
Crypto exposure
Crypto rewards provide one feature that traditional cards can’t offer. They allow everyday spending to generate digital assets. Instant of receiving conventional cashback, a cardholder receives exposure to an asset like Bitcoin.
For someone who already wants to own digital assets, crypto rewards could prove useful. Instead of earning cashback and using it to make a separate crypto purchase, the cardholder may receive Bitcoin or another asset directly through a rewards program.
Crypto exposure does mean more volatility. The value of rewards may change quickly after they’re received. If the price of Bitcoin, for example, declines, then the value of accumulated rewards is reduced (of course, the reverse is also true).
However, crypto cards make digital assets more usable in everyday life. Instead of buying crypto separately and leaving it in a wallet or exchange account, people can (in some cases) spend their existing holdings through the card. This can make crypto more practical for regular expenses.
Consumers should consider taxes and reporting requirements. Depending on one’s jurisdiction, these may apply to rewards and subsequent transactions.
Fees and interest
Neither type of card is automatically cheaper. Traditional cards may charge annual fees, balance transfer fees, late fees, interest, and foreign transaction fees. Premium cards charge substantially more for additional rewards and benefits.
Crypto cards can have similar charges and may involve costs for converting, transferring, withdrawing, or selling digital assets.
Users should remember that a high rewards rate doesn’t make a credit card worthwhile if interest charges outweigh the rewards. Carrying a balance can reduce the supposed benefit of any rewards program.
Consumer protections
Traditional credit cards have more established consumer protections. Depending on one’s country and card, these might include protections against unauthorized transactions, problems with purchases, fraudulent charges, and billing disputes.
Crypto cards can provide card-level protections (when transactions run through established networks), but the crypto element can mean there are additional considerations. For example, losing access to a crypto wallet may not have the same recovery process as disputing a traditional card purchase. Also, crypto transactions can be difficult or impossible to reverse.
Consumers should distinguish between protection for the card transaction and protection for the digital assets connected to the account.
In brief, traditional cards offer more protection.
Credit-building
If building a conventional credit history is a priority, a traditional credit card with clear reporting practices may be easier and more straightforward. Traditional cards can normally help establish or strengthen a user’s credit history.
Regular payments and responsible credit utilization contribute to a stronger credit profile, particularly in the long-term. Late payments and high balances have the opposite effect.
Crypto cards vary in how they function. Some are genuine credit products that report activity to credit bureaus. Others operate more like prepaid cards, debit cards, or secured products and don’t provide the same credit-boosting benefits.
Anyone choosing a crypto card primarily to improve their credit should check whether the account reports payment activity before choosing that option.
