How do crypto debit cards work?
Second, you need to link bank accounts to transfer money on the card. You transfer USD from your bank account to the corresponding cryptocurrency exchange on the card, and then load the cryptocurrency onto your card. You need to think carefully about which coin to use, considering transaction fees and the volatility of the coin you want to use.
In this move, Manuel, who lives outside of Baltimore, and David, who lives in Helsinki, Finland, decided to load their cards with stablecoins pegged to the value of fiat currencies like the U.S. dollar. Examples of stablecoins include USD Coin (USDC), Tether (USDT), True Australian Dollar (TAUD) – pegged to the Australian dollar – and more.
“If you want to use your card every day, use stablecoins,” David said. This allows you to stick to a regular budget, since other cryptocurrencies are so volatile that it is nearly impossible to know in advance how much of each currency you will need. (As a result, paying a mortgage with bitcoin is generally not a good idea.)
Once you decide to use stablecoins, you can set up your card to automatically transfer money regularly from your bank. This method is for people with regular paychecks and predictable monthly bills who you know will accept a debit card as a payment method.
The Caceres brothers use their Crypto.com card to pay for their food, electricity and water bills. Other bills like mortgages and car payments don’t always accept debit cards without additional transaction fees, so it may not be worth it in the long run.
“My paycheck goes into my bank account as usual,” David said. “And then every month I use our calculated budget for housing, groceries, etc.” David said he spends about $600 a month on groceries. “So I immediately bought the $600 USDC stablecoin. From there I moved it to the map.”
What are the risks of using a crypto debit card?
Crypto fraud and theft are currently rampant due to the novelty of cryptography, the increase in the number of cryptocurrencies in circulation around the world, and the new infrastructure for building systems. It’s a great environment for William Quigley, one of Tether’s original co-founders and co-founder of the Wax blockchain, who he calls “Olympic-grade liars,” to test their skills and escape all getting into crypto Market circulation of new funds of money. Scammers stole more than $14 billion worth of cryptocurrency last year.
Even the major cryptocurrency exchange, Crypto.com, was recently hacked and lost around $30 million. The breach exposed 483 digital wallets, but the company claims no customer funds were lost. However, the incident illustrates why crypto-heavy investors should always use good digital wallet hygiene (no sharing security phrases or passwords), use cold storage to protect large amounts of crypto, and ask about every crypto debit or card The insurance policy should be credited before you open it.
In contrast, traditional banks have FDIC insurance to cover the loss if your bank fails. Unbeknownst to many, FDIC insurance does not cover loss or theft; this protection is usually based on a bank’s personal insurance policy. Banks are protected by federal guidelines to protect customers in the event of fraud, but customers are responsible for reporting errors promptly.
Again, you should know the details of the protection or insurance coverage you get with a crypto debit card and your responsibilities.
What are the benefits of using a crypto debit card?
The benefits of using a crypto debit card are constantly changing and evolving. At a basic level, customers can earn crypto rewards from their daily spending. For example, the Crypto.com Card offers a range of tiered rewards cards with refund rates ranging from 1% to 8%.
To receive a higher reward percentage, you must be willing to purchase the company’s native cryptocurrency CRO and keep it in Crypto.com’s wallet app for at least six months. This process, known as “staking,” allows for greater circulation and increases demand for the currency, thereby increasing the value of the blockchain ecosystem. The longer and higher you bet, the more rewards you get.
“The lowest is 1 percent cashback, and then the next few levels go up,” David said. At the highest level, users can even benefit from free Spotify, Amazon Prime, and Netflix subscriptions, as well as discounts on Airbnb and other purchases.
Note that altcoins can be more volatile and unreliable than Bitcoin or Ethereum. So it’s more important not to buy more than you can afford to lose in case the coin ends up losing all its value.
Do you have to pay taxes on crypto earned from crypto debit cards?
Yes, you must record the value of the cryptocurrency you earn in U.S. dollars and declare that income on your tax return.
According to Lisa Braganza, a former SEC branch manager and investment attorney, centralized cryptocurrency exchanges like Kraken, Gemini and Binance currently report trading activity to the IRS, although this is not always the case. There are still no uniform requirements for what exchanges must report. Regulators may want to increase the tax filing liability of any crypto platform hosting decentralized finance (DeFi) activities, including activities such as staking (holding) crypto on rewards cards in exchange for monetary benefits.
Bragança is confident that exchanges will comply: “As these exchanges seek more authority, they are also seeking this legitimacy.”
Conclusion: Are Prepaid Crypto Cards Worth It?
Each crypto debit card works differently, and each card has its own reward structure. Research thoroughly before enrolling. Factor in processing fees (just like debit cards). Ask yourself if rewards are right for your lifestyle.
If, like the Caceres brothers, you’re still interested in earning cryptocurrency and learning to pay your bills with a prepaid card, remember to take your time. Cover the essentials in your household budget and start with your long-term investments, housing benefits, and emergency funds.
After that, crypto rewards cards can be a convenient way to learn about decentralized finance while earning rewards.
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