How Do Bitcoin Credit and Debit Cards Work

Bitcoin is a type of currency that uses digital tokens that can be sent electronically from one person to another. Like dollars, Bitcoin can be used to complete everyday transactions, as long as the person or business accepts Bitcoin as a payment method.

If you have Bitcoin and want to use it for everyday transactions, you might consider a Bitcoin debit or credit card. This way you could swipe your card and complete the transaction with the bitcoins you have in your wallet. 

A Quick Look at Bitcoin

The price of a single Bitcoin constantly fluctuates, based on market bidding (similar to stocks, gold, and foreign currencies). Bitcoin topped $19,000 in December 2017, only to plunge to $7,200 by February 2018. As of May 31, 2020, Bitcoin was priced at $9,553.36.1 What makes Bitcoin unique is that the Bitcoin network—where Bitcoins are transferred—isn’t controlled by any person or company, but rather by a decentralized network of computers. A record of all Bitcoin transactions is stored on the computers of every person who helps verify Bitcoin transactions.

Bitcoins are stored in a digital wallet that has a unique ID. To send Bitcoin to another user, that person must send you a unique address generated by the currency exchange platform. You’d then copy the address into your Bitcoin exchange platform, enter the amount, and press send.

It can take up to an hour for a Bitcoin transfer to complete.

Bitcoin Credit Cards

There are currently no Bitcoin credit cards available, but they may be soon. Fold, a bitcoin-friendly shopping app, may release a Bitcoin rewards credit card as soon as July 2020.2

Blockrize is another company that may have a credit card released in 2020. An entrepreneur based in San Francisco is working on a credit card that offers cryptocurrency as a sign-up bonus for new cardholders similar to how other credit cards offer points or miles as a signup bonus. The card would pay 1% cryptocurrency rewards similar to how other rewards credit cards pay 1% cash back. There are more than 5,000 people on the waitlist, according to the card’s signup page.3

Right now, U.S. credit cards only allow purchases in U.S. dollars. If you wanted to pay your credit card bill with Bitcoin, you’d have to convert the Bitcoin to U.S. dollars by transferring to your checking account.

The ability to purchase Bitcoin with a credit card is also limited since many major credit card issuers and banks have banned cryptocurrency purchases.

Bitcoin Debit Cards

While there are no Bitcoin credit cards available as of June 2020, there are Bitcoin debit cards. Coinbase offers one backed by Visa. It enables users to use their Bitcoin to pay for everyday purchases.4

First, you’ll need to open a Bitcoin wallet. Connect your Bitcoin debit card to your Bitcoin wallet. Then, you can use your credit card anywhere that network cards are accepted. For example, if you have a Visa Bitcoin debit card, you can use it anywhere Visa credit and debit cards are accepted. Backed by a major processing network would give purchases the same zero fraud liability as regular credit card purchases when the card is used as credit.

There may be fees associated with Bitcoin debit cards similar to what you’d pay with a prepaid card. For example, you may pay withdrawal, transaction, or monthly account fees with a Bitcoin debit card. Keep in mind also, that since the price of Bitcoin fluctuates, the amount of Bitcoin needed to complete a transaction can fluctuate, even within a single day.

It’s important to keep track of the amount of currency you have in your Bitcoin wallet in Bitcoin and in U.S. dollars so you know whether you have enough to complete the transaction.

Carrying a backup payment method is a good idea in case the merchant doesn’t accept the Bitcoin debit card or you don’t have enough funds to complete your transaction.

Unfortunately, Bitcoin debit cards may be shortlived. In 2018, Visa told BitPay—one of the most popular Bitcoin debit cards—to close its accounts.5 Other crypto debit card cards have also closed and are returning funds to consumers. Bitcoin debit and credit cards available in other countries may not be available in the United States. Finding a Bitcoin debit card may be more difficult, especially considering that Bitcoin is currently unregulated by Federal agencies.

Whenever you use Bitcoin, whether with a credit card or a debit card, use caution. Cryptocurrency is a volatile asset and there is still a lot to be done to regulate it and ensure it's safe from scams and fraud.

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