The Investor’s Guide to Crypto Credit Cards

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  • Crypto credit cards are a familiar way for people to start investing in crypto without having to spend weeks learning about the ecosystem
  • With lower fees and potential for collateral appreciation over time, crypto loans maximize purchasing power

A Quick Primer on Crypto Credit Cards

Crypto credit cards are very similar to any other credit card. You make purchases using a line of credit, earn rewards, and pay off what you owe at a certain interest rate. What makes crypto cards different is that they give you a direct line of credit using your digital assets as collateral, eliminating the need for a credit check.

The inability to use cryptocurrency to purchase everyday goods is a common criticism. But with crypto credit cards, the user does not notice any difference at Trader Joe’s payline. This direct line of credit can provide instant liquidity of their crypto wallet.

The difference between crypto credit cards and crypto debit cards

Crypto debit cards work much like a traditional debit card. Users fund their account with stablecoins, bitcoins or altcoins. And when they use it at their local Gamestop, the card sells the equivalent value of their assets in exchange for the USD needed to make the purchase.

The main difference between the two is that crypto credit cards allow you to borrow funds for purchases and crypto debit cards sell your assets immediately whenever you make a purchase.

The case of crypto cards

During a recent episode of Empire, Jeff Dorman recalled that 20 years ago, people were afraid to put their credit card in a machine. Today we cannot imagine our lives without these magic rectangles. With some countries adopting bitcoin as legal tender and innovations like crypto cards, the question of wide adoption is not if, it’s when. But this fate is not the only reason to use a crypto credit card.

Earn Crypto Rewards

There are many rewards cards that offer cash back, travel points, or other types of loyalty points for goods and services. Crypto credit cards offer crypto rewards. It’s a great way to stack sats or other cryptocurrencies without having to buy them on an exchange. Although the rewards differ from card to card, it is easy to see the potential advantage when crypto has a history of appreciating over time and fiat has a history of decreasing in value.

TradFi and DeFi Bridge

Over the past few years, crypto adoption has skyrocketed, mirroring the Internet adoption curve of the 90s. But even today, it can be difficult for new users to figure out how to get started with the currency. digital. Crypto credit cards are a familiar way for people to start investing in crypto without having to spend weeks learning about the ecosystem. What Robinhood did for stock investing, crypto credit cards can do for crypto adoption.

Barriers to Adoption of Crypto Cards

The taxable event

Most crypto cards create a taxable event each time you make a purchase. Since most governments classify cryptocurrencies as property rather than foreign currency, they are subject to capital gains. So if you were to use a crypto debit card to buy a $5 Mother’s Day card and your wallet is up 100%, that move will result in a costly tax bill.

Price volatility

Many investors are hesitant to use crypto charts due to the large price swings and volatility. Not only do they want to avoid paying capital gains, they want to avoid missing out on potential gains. This mindset is why many view crypto largely as a store of value rather than a currency. This is why platforms such as Nexo are innovating so that investors can use their crypto without missing out and pay capital gains every time they make a purchase.

How the Nexo card works

What makes the Nexo card unique is how it encourages HODLing. Using Nexo’s proven, crypto lending service, Nexo cardholders can use a line of credit to make purchases in fiat without actually selling their crypto. Not only does this allow them to keep valuable assets, but it will not trigger a taxable event by selling crypto to make fiat purchases as is the case with other crypto cards. And as a bonus, every transaction with the card pays back up to 2% in crypto rewards.

What is Crypto Lending?

The way Nexo uses crypto-backed loans as a line of credit is a first for crypto cards. To understand a little more, here is how the loan works.

P2P and trustless

Unlike the traditional financial system, crypto lending is peer-to-peer and trustless. You don’t need to apply to a lending institution, get your credit score checked, get approved, or trust a centralized company. If you have collateral, you can borrow. Crypto-back loans tend to be over-collateralized for this reason, opening borrowing opportunities to more people.

Automated smart contracts

Because crypto-back loans use smart contracts that run automatically, they are as strong as the code itself. They also have lower fees than traditional loans because no middleman takes a discount.

Maximize purchasing power

With lower fees and potential for collateral appreciation over time, crypto loans maximize purchasing power. If you borrow from your crypto wallet without selling the underlying asset and its value increases, your borrowing limit will also increase.

Final considerations

Fiat is not going away yet, and crypto needs to become convenient for everyday users. Crypto credit cards do this.

As with all investments, there are risks that must be carefully considered. Under-collateralization could trigger loan liquidations, and crypto volatility may cause investors to seek higher interest yields, but with the risk in mind, companies like Nexo are coming up with new and innovative ways to change the landscape of crypto credit cards.

Related Articles

The Investor’s Guide to DeFi 2.0

The Investor’s Guide to Yearn Finance


This investor guide is sponsored by Nexo.

The content of this webpage is not investment advice and does not constitute an offer or solicitation of an offer or recommendation of any company, product or idea. It is intended for general educational purposes only and does not take into account your individual needs, investment objectives or particular financial situation.

  • Emily Weber

    Emily Weber is a content writer and a passion for decentralization. It aims to read to the end of the internet so you don’t have to. In her spare time, you can find her creating great memes and following handles on Twitter.

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