Is Bitcoin the Future of Credit Card Rewards?

Recently, cryptocurrency-based lender BlockFi announced a new rewards credit card that will offer Bitcoin instead of cash back, points, or miles. At this point, the card is one of a kind in the credit card space, but it joins a handful of crypto-focused debit card reward programs that may collectively help disrupt the industry. 

Why Cryptocurrency Rewards?

Cryptocurrencies are gaining popularity among investors and even everyday consumers. The price of Bitcoin, for instance, has been volatile but recently surpassed $23,000. Even major companies like Microsoft, Expedia, and Overstock.com accept Bitcoin as a payment method at checkout. 

But while many consumers are curious about Bitcoin and other cryptocurrencies, there is also a lot of confusion about how they work and the blockchain technology behind them. 

Enter Bitcoin rewards programs.

These programs may be worth considering if you’re intrigued by cryptocurrency—and even want to own some—but you’re worried about the volatility in prices. When you swipe a credit or debit card that has a Bitcoin-powered rewards program, you’ll earn the cryptocurrency without spending your own money—other than your normal spending, which is no different from traditional credit and debit card programs.

What’s more, today's most popular types of rewards are designed to be spent, not saved. Your cash back loses value over time due to inflation, and hotel and airline rewards programs regularly devalue their points and miles. 

With cryptocurrency, on the other hand, cardholders may be more inclined to hold onto their rewards and, with any luck, see them rise in value. 

The Future of Cryptocurrency Rewards Programs

While people may be curious about Bitcoin, that may not be enough to make them ditch the safety of a traditional rewards program, in part because cryptocurrency pricing is so volatile. While Bitcoin recently hit an all-time high, the price also spiked to nearly $20,000 in 2018 before falling by more than 80% during the same year. 

For rewards enthusiasts who aren't comfortable with that kind of uncertainty, it may be a hard sell.

And with BlockFi’s new credit card, in particular, customers will pay an annual fee of $200, which is high compared with cash back and even travel credit cards with the same rewards rates. Of course, rising Bitcoin prices could make up for that, but it’s still a gamble that many will be unwilling to make.

Over time, however, we’ll likely see more iterations of crypto-based rewards programs, and that competition will help drive down costs and make the cards more attractive. Will they replace traditional cash back, points, and miles programs? Not likely. But they may become a viable alternative for many consumers.

Until then, if you’re considering a Bitcoin credit or debit card, treat it like any other financial product. Take your time to shop around and compare multiple options before you settle on the best fit for you.