You're probably not replacing your go-to rewards card anytime soon.
Cryptocurrency spent years as a niche curiosity, but it has recently hit the spotlight -- at full speed. And though not everyone understands crypto, most Americans want it anyway. In fact, 14% of Americans currently own crypto, and that number may double in the next year according to a survey by The Ascent.
One way many folks may jump on the crypto bandwagon is through their credit cards. We found that 65% of respondents would love a credit card with crypto rewards. Issuers must be reading the same data, because crypto rewards credit cards are becoming a reality.
Of course, there's the age-old saying that just because you can, doesn't mean you should. Crypto might be all the craze right now, but that's not necessarily a good enough reason to forgo more traditional rewards cards like cash back or travel cards.
Cryptocurrency is volatile and hard to value
The biggest downside to crypto credit card rewards is probably the volatility. The value of various currencies changes every day and often by big margins. This extreme volatility means that the value of your rewards will vary significantly, making it impossible to estimate the return on your spending.
In comparison, cash back rewards cards have steady return rates. Sure, most currencies have some variance, but the U.S. dollar is nowhere near as volatile as Bitcoin or Dogecoin. This means your 3% cash back card will be just as valuable today as it was yesterday.
Similarly, the value of your credit card points can vary quite a bit between rewards programs, and they can be devalued by changes in award redemption rates. But those changes are typically infrequent, and they'll often come with some sort of warning from the issuer. If Bitcoin's value drops $500 a coin tomorrow, you're probably not going to have enough of a heads up to redeem your rewards or otherwise salvage your value.
Digital currencies are hard to spend
Unless you're planning on selling your crypto for cash or sitting on your collection for laughs, putting your crypto rewards to use will probably be a bit complicated. Indeed, even turning it into cash may require setting up a crypto account with some third-party site like Coinbase.
The number of retailers and other merchants willing to accept cryptocurrencies as payment are growing -- but not quickly. A handful of car dealerships, for example, will accept Bitcoin payments, but you're probably not earning enough crypto from credit card rewards to buy a new BMW.
Similarly, there are a few retailers, like Newegg and Overstock, that will accept a few of the many types of cryptocurrency as a form of payment. But, again, the amount of crypto you receive from your rewards card will probably mean you're sitting on those rewards for a while. And their value could drop while you're saving up for that macrame wall hanging.
Novelty rewards of questionable use
So far, it really seems like crypto credit card rewards are going to be more of a novelty than a practical way to save money on your credit card purchases. And there's nothing wrong with that. If you want to dip your toes into the crypto world, throwing a few purchases onto a crypto rewards card could be an easy way to do so.
However, don't expect your crypto credit card to replace your trusty rewards cards. It's also important not to let the crypto aspect make you forget that a credit card is still attached to a credit line. This means debt.
No matter how well Bitcoin is doing that day, the crypto you get with a credit card is probably not going to pay off your interest fees, so make sure you're not making unnecessary purchases just to get more crypto. There are better ways to go about it that won't end in spiraling credit card debt.
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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
