If you think cryptocurrencies are a good long-term investment, a rewards program like Lolli or a cash back credit card that allows you to earn crypto while spending dollars can ease your way into the crypto market. But even if you don’t jump fully into cryptocurrency this way, it’s still important to keep in mind the added risk and volatility involved.
Crypto Rewards Programs
lollipop (opens in new tab) allows customers to earn up to 30% in Bitcoin rewards when they shop online at one of their partner retailers, including Ulta, Nike, Chewy, eBay, Sephora and Staples. Lolli also allows users to link a card to the Lolli app to earn up to 10% back in Bitcoin for in-store purchases at select retailers, such as American Eagle, CVS and Shake Shack. RewardsBunny (opens in new tab) allows customers to shop online through their platform and earn crypto for every dollar spent. The company has partnered with many large companies, including Booking.com and Walmart. Fold allows customers to earn up to 20% in Bitcoin rewards by offering gift cards that can be purchased from their website and redeemed at popular retailers.
Credit cards with crypto rewards programs
Many companies also offer traditional credit cards that earn crypto rewards instead of cash, points or miles. Major cryptocurrency exchanges including Crypto.com, BlockFi, Gemini and Coinbase (COIN) all offer debit and credit cards through which customers can earn cryptocurrency rewards for spending dollars. These cards allow customers to earn cryptocurrency directly or reward points that can be redeemed for crypto. Most of these cards offer rewards of 1.5% or 2% on most purchases, while some offer higher rewards for certain types of purchases, such as dining or groceries.
A few financial technology companies also offer credit cards that allow users to earn crypto. SoFi offers a cash-back credit card that allows customers to earn rewards and turn them into crypto when deposited into a SoFi Crypto account. Upgrade Inc. offers a credit card that earns 1.5% back in Bitcoin. Venmo allows users of its credit card (opens in new tab) to buy crypto with the rewards earned with the card.
Risks of Crypto Loyalty Programs
One of the biggest differences between crypto and regular loyalty points is the value of the rewards. Loyalty points have a fixed redemption value set by the program, whereas the value of crypto rewards fluctuates with the value of the digital token at any given time. For example, a credit card that offers 2% cash back means you can receive a $20 credit on a $1000 purchase. A credit card (or crypto rewards program) that offers 2% back in Bitcoin means you will receive $20 worth of it. Twenty dollars could have bought you 0.00029 BTC on Nov. 8, 2021 and 0.0011 BTC on Nov. 8, 2022 – about 70% less due to the significant decline in Bitcoin’s value over the past year.
Given the volatility of crypto, this is something very important to keep in mind, as your actual payback could be much less (or greater) when you finally decide to trade or use the crypto you’ve earned.
Another thing to keep in mind is that crypto rewards can come with a tax bill. With regular credit card rewards or other rewards programs, you don’t face any tax consequences for redeeming them. However, if customers redeem cryptocurrency in any form, they may owe taxes to the IRS since the agency treats cryptocurrency as property, so every time a digital asset is sold, it triggers a capital gain or loss.