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Bitcoin credit and debit cards will change earning rewards in 2021

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  • In 2021, points and miles aren’t the only things you’ll be able to earn for your spending; Bitcoin is splashing into the rewards space.
  • The two early entrants are a credit card from BlockFi and a prepaid card from Fold with different structures for earning.
  • If you’re wary of actually buying Bitcoin, this might be your route to getting involved without dealing with crypto exchanges and fees.
  • Read Business Insider’s guide to the best rewards credit cards.

If you’re like me, you’ve seen Bitcoin valuation surges and kick yourself for not buying it in 2015. Then, a day later, you read headlines of the potential for a crash in Bitcoin valuation and feel okay about avoiding the Wild West of cryptocurrency.

However, that unexplored territory is becoming a bit tamer – or at least more mainstream. In recent months, PayPal has unveiled the ability to buy, hold, and sell Bitcoin, and Fidelity has launched a Bitcoin investment fund. Now, Bitcoin is coming for something everyone loves: The rewards on the cards you carry in your wallet.

A debit card that earns Bitcoin rewards

“The rewards industry has not really innovated since the inception of airline miles,” Will Reeves, CEO of Fold, says. “It’s very ingrained in how people use their cards.”

Reeves is part of a cast of financial disruptors who are aiming to make crypto part of everyone’s wallet. His company has already started, too. A few thousand people are using the Fold card. It’s a prepaid debit card, and while traditional debit cards don’t offer compelling rewards, Fold marks a major departure from “tradition.” Cardholders earn small fractions of Bitcoin — called Satoshis in reference to Satoshi Nakamoto, the individual who founded Bitcoin, also known as  “sats” — for their spending.

You might know exactly what you’ll earn on each purchase with your current favorite card in your wallet, but Reeves says that the Fold card aims to “gamify the entire experience.” Users swipe their cards to pay for purchases with their pre-loaded funds, then receive a push notification on their phones to open up a spin wheel with eight different prizes.

Those prizes change every week, and they include options like a 1,000-sat bonus, a 10% boost in a select category of spending, and winning one full Bitcoin. “Sometimes you’re going to win big,” Reeves says. “Sometimes you’re going to win small. We average out to 3% rewards on all spend going through the platform.”

The fun element of a Wheel of Fortune-style game approach isn’t the only exciting piece of the card — it’s the earning potential. Reeves highlights that Bitcoin “has been the best-performing asset of the last decade.”

“It has volatility,” he says, “but generally, this is an asset that tends to appreciate.”

Reeves says that some of the Fold cardholders who have been using it for the past six months are averaging 15% back due to Bitcoin’s increase in value.

A model that shifts from spending points to saving them

For those who are accustomed to trying to turn rewards points into first-class seats, 15% is an eye-popping number. Zac Prince, CEO and founder of BlockFi, is no stranger to that world of points and miles. In fact, he used to be one of those who regularly tried to squeeze as much value out of them as possible.

“When I was in my young 20s and figuring out what having a good credit score meant, I was all over the points game,” he says. “As my life got more complex over time with a wife, kids, and a demanding job, I focused less and less on the credit card rewards game. I think a lot of people go through that same cycle.”

Prince is now focused on changing rewards with the company’s new Bitcoin Rewards Credit Card. The card has a straightforward rewards structure: 1.5% cash back in Bitcoin on every purchase. There is an annual fee of $200 and an attractive sign-up bonus of $250 in Bitcoin after spending $3,000 on purchases in the first three months. The earning continues, too, by flowing into a BlockFi account that pays 6% interest.

The structure runs counter to the worries that weigh on some travel cardholders: What if my program gets rid of that transfer partner next year? Should I buy a ticket now in case mileage redemptions increase? The potential for devaluation leads many to avoid holding on to their points.

“Credit card rewards points are meant to be spent, ideally as quickly as possible,” Prince says. “They’re not something that you would want to make a bet on being worth more next year. They’re most likely to be worth a little bit less.”

“The fundamentally coolest thing here is that you’re earning rewards in something that could appreciate in value,” Prince adds. “You can reasonably expect that if you just don’t touch the rewards you’re getting from this card, they’re going to be worth more in the future.”

If you’re interested in Bitcoin but don’t want to actually buy it, this is your world

The chance to earn rewards in Bitcoin is an ideal fit for someone who Prince describes as “crypto curious.”

“They’ve heard about it from their friend or their cousin,” Prince says. “They think it’s interesting, but taking the step of spending their own money to acquire it might feel like too much.”

Prince says that one of the main draws of the card is appealing to that “crypto curious” individual. “You don’t have to spend your own money to get it,” he says. “You’re just doing the same thing you already do with a credit card. Instead of getting cash back or airline miles, you’re getting Bitcoin. It’s a really low-risk way to start getting some Bitcoin, and the familiarity of Visa makes it more comfortable.”

Fold also appeals to that audience. “We built Fold to speak to those who have heard about Bitcoin and are interested but haven’t found the right way to start accumulating it,” he says. “Buying it [might seem] risky. It’s your hard-earned money. You have to go through exchanges. There are a lot of fees involved.”

Plenty of people are getting on the Bitcoin train

In addition to the few who are already using it, Reeves says that more than 100,000 people are on Fold’s waitlist. The company is getting cards in the hands of a few thousand people each week and expects to hit 250,000 cards within the first three months of 2021.

At BlockFi, existing customers have priority access on the company’s waitlist, and the general public will be able to sign up in January 2021. Prince expects the rollout of the card will begin in March, and he forecasts somewhere between 250,000 and one million cards in the market by the end of 2021. That’s a big shift, but Prince thinks it’s only the beginning for transforming credit card rewards.

“It’s not strictly a crypto story,” he says, pointing toward companies like Stash, which allows cardholders to automatically direct their rewards toward stocks. “I think you’re going to see more of this. As these options become available, any consumer who is investment-oriented will gravitate more toward cards that are incentivizing investing behavior instead of consumption behavior that motivates you to spend your points.”

Think earning Bitcoin for your rewards sounds appealing? Here are a few key things to know.

It might feel different, but some pieces of this experience will stay the same

For credit cardholders, the rewards aren’t the only attractive piece of the puzzle. There are other extra perks like car rental insurance, price protection, and exclusive discounts at retailers. The BlockFi card will come with the standard benefits that apply to Visa Signature cards.

You’re not late

Bitcoin has been around for a while now, so it can feel like you’re way behind the trend. However, this is still the beginning.

“It is just beginning its adoption curve,” Reeves says. “Right now, if you are even thinking about getting exposure to Bitcoin, you are in the top 5% of everyone in the world. You are far earlier than you may think you are.”

You have to be willing to ride the ups and downs

When you look at the long game for Bitcoin, it looks amazing. Consider if you were earning Bitcoin as a reward on January 1, 2020. Coindesk shows it was valued at just over $7,174 at that point in time. As I’m writing this, the currency is valued at more than $20,000.

There are some major bumps, though. Consider if you had Bitcoin rewards on November 25 — valued at more than $19,000 — that you wanted to cash in on November 26. The value dropped to under $17,000 in less than 24 hours.

If you’re going to start earning Bitcoin, here’s to hoping that a bold prediction of a 30x return from the Winklevoss twins comes true.

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