Ask the Orb: 4 things to consider when using a crypto debit card.
If you want to get a crypto debit card, here are some tips, strategies, and best practices to keep in mind when looking for the ideal one.
Number 1: is the service available in your area?
Today, cryptocurrency adoption is higher than it has ever been. However, several jurisdictions throughout the world are trending in the opposite direction. According to recent reports, cryptocurrencies may soon become illegal in some nations, with outright prohibitions in places like Turkey, China, and India. Others like the United States are considering a national digital currency and permitting trading, buying, and selling of crypto coins.
As a result, while the crypto debit card should function at any POS that accepts debit cards, it may not be as useful in crypto-hostile areas. Therefore having a backup plan is always recommended.
Number 2: Do you have to pay tax on your cryptocurrency debit card transactions?
Yes! The Internal Revenue Service (IRS) regards cryptocurrencies as property — specifically, capital assets. In the view of the IRS, Bitcoin and other cryptocurrencies are financial instruments akin to bonds and equities, not currencies.
This implies that you must disclose any capital gains or losses when you use your crypto debit card to make transactions. You should be aware that you owe taxes on your cryptocurrency profits when using a crypto debit card to purchase goods or services if the price of crypto is greater at the time of transaction than when you obtained it.
The amount of crypto taxes you owe is determined by the length of time you owned the coins and the amount of profit you made if any. If you use your crypto debit card to make transactions when your assets are in a loss position, you can utilize this capital loss to offset capital gains using a practice known as tax-loss harvesting.
Number 3: What are the supported cryptocurrencies?
In the above picture, we can see that the crypto debit card with which John purchased coffee only enabled Bitcoin. Such a card only accepts Bitcoin as a deposit, which is subsequently converted into the desired fiat money by the processing business.
It is useful to be aware that thousands of cryptocurrencies are available today, but only a few have attained public acceptance. As a result, it may be advisable to choose a crypto debit card that supports popular tokens or your favorite coin. Fortunately, most crypto debit cards accept numerous cryptocurrencies.
Number 4: What fees and exchange rates apply?
Varying credit card companies impose different transaction fees. The bulk of the debit card companies we contacted does not impose deposit fees. However, they all charge withdrawal fees. Some card companies may eliminate costs if you spend a specific amount of money on cryptocurrency each year.
It’s also worth checking to see if the service charges for currency conversions. Forex costs are a well-known issue in the conventional financial business. Most crypto cards do not charge foreign exchange costs, and those that do charge forex fees do so primarily to repay Mastercard and Visa — the processing corporations.
Crypto debit cards vs. traditional debit cards
The underlying idea behind crypto debit cards is identical to that of ordinary debit cards. So, why not use your usual credit card? Crypto debit cards provide a few advantages that standard debit cards do not.
Many crypto debit cards, for example, do not charge consumers exchange rate fees. Cryptocurrencies are decentralized currencies, as opposed to distinct currencies on opposing sides of the market. As a result, turning Bitcoin into US dollars is identical to converting the tokens into Russian rubles, and you have the same amount of money regardless of your geographical location.
Additionally, you don’t need a bank account to use a crypto debit card, although you need an account at an exchange or wallet. As such, such cards make online purchases faster and more convenient.
Pros and cons of crypto debit cards
• The ability to spend cryptocurrency as if it were fiat cash
• Reduced or waived foreign exchange costs
• In general, multi-currency allows for more diverse expenditures.
• Some credit cards provide large cash-back incentives in cryptocurrency.
• Some issuers may waive ATM withdrawal costs.
• Spending cryptocurrency results in a taxable event.
• There are certain geographical limitations.
• You must have money in your wallet in order to spend it.
Bridging the gap between traditional finance and cryptocurrency
Bitcoin has been around for a little more than a decade. It’s incredible that you can now use a bitcoin/cryptocurrency-linked debit card. Before using services such as cryptocurrency debit cards, be sure to conduct your own study.
Also Read: BTC and how it affects the general market