Slowly, crypto-back rewards on Visa and Mastercard debit cards that allow you to spend your cryptocurrency holdings at checkout and point-of-sale are coming back to earth.
Basically, they work like cashback programs, except instead of US dollars, you get a reward in bitcoin, ether, or a number of other smaller, lesser-known cryptocurrencies.
Also, in many cases, the rewards you can get are much higher. Or seem to be anyway.
The Visa debit card issued by Nasdaq-listed cryptocurrency exchange Coinbase was recently offering 5% on all spend, while the Crypto.com exchange was offering 8% to its top-tier cardholders, as was the largest exchange in the world, Binance (which does not operate in the United States)
The cards certainly have appeal, with Visa reporting in July that spending on crypto debit cards topped $1 billion in the first half of 2022, so they’re popular with crypto owners.
Also Read: Issuers Rush to Meet Consumer Demand for ‘Cash Back’ Crypto Cards, Despite Volatility and Risks
Yes, but …
However, big powerful asterisks are starting to appear.
Coinbase only offered this rate if you took your rewards in Stellar Lumens (XLM) tokens, rather than bitcoin, which only offered 1%.
Crypto.com’s 8% rate only went to cardholders in the top five tiers who held approximately $360,000 of the exchange’s own CRO token on deposit. The exchange’s CEO, Kris Marszalek, announced that it was lowering that maximum rate from 8% to 2% in early May, slashing rewards even more drastically on its other four tiers.
Also Read: Crypto.com Discovers Loyalty Programs Are a Two-Way Street
The decision to reduce cash back rates and introduce monthly reward caps was “to get closer to the long-term sustainability of our card program,” he said. tweeted May, the 1st.
This decision lasted about a day, with the highest rate going up to 5% and the lower levels bouncing to 3%, 1.5%, 0.5% and 0%, with levels three and four capped at 50. $ and $25 rewards per month.
Binance’s 8% is reserved for people with at least 600 of its BNB tokens — currently worth around $312 each — in their account. Without any BNB, the cashback rate on crypto spending on the account linked to your debit card is 0.1%, although it goes up to 2% on a BNB.
BlockFi’s Visa debit card recently lowered its fixed rate from 2% to 1.5%, although it goes back to $30,000 in annual spending.
Too good to be true
While some cards offered rewards that seemed too good to be true, this is starting to fade. Largely because it was all too good to be true.
Last November, crypto trading and lending platform Voyager Digital announced that its Mastercard debit cards would offer a 9% crypto rewards card – 10.5% if you were enrolled in the trading platform’s loyalty program – on USDC stablecoins held on your card.
This rate was not funded by money earned on the cards – they are debit cards, after all, so consumers weren’t paying interest – but rather by “marketing expenses”, the CEO said. from Voyager, Steve Ehrlich, to PYMNTS Karen Webster.
See more: Mastercard and the Voyager team to make USDC stablecoin consumable and mainstream
That return was funded by its other lines of business, Ehrlich said, calling it “fertilizer” to attract new account holders.
Voyager halted withdrawals and then went bankrupt in July, freezing customers’ assets, which it said were likely to be compromised. That doesn’t sound very rewarding.
See More: How Stablecoin’s $48 Billion Collapse Affected Crypto