If you think cryptocurrencies are a good long-term investment, a rewards program like Lollipop or a cashback credit card that allows you to earn crypto while spending dollars can ease your way into the crypto market. But even if you’re not fully into cryptocurrency this way, it’s still important to keep in mind the added risk and volatility that comes with it.
Crypto Rewards Programs
lollipop (opens in new tab) Allows buyers to earn up to 30% in bitcoin rewards when they shop online from any 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 worked with many big 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 on 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 that allow customers to earn cryptocurrency rewards for spending dollars. These cards allow customers to directly earn cryptocurrency or reward points that can be redeemed for crypto. Most of these cards offer bonuses of 1.5% or 2% on most purchases, while some offer higher bonuses for certain types of purchases, e.g. B. food or groceries.
Subscribe to something Kiplinger’s personal finances
Be a smarter, better informed investor.
Save up to 74%
Sign up for Kiplinger’s free e-newsletters
Profit and thrive with Kiplinger’s best expert advice on investing, taxes, retirement, personal finance and more – straight to your email.
Profit and thrive with the best expert advice from Kiplinger – straight to your email.
Some financial technology companies also offer credit cards that allow users to earn crypto. SoFi offers a cash back credit card which allows customers to earn rewards and convert them into crypto when funded into a SoFi crypto account. Upgrade Inc. offers a credit card that returns a flat 1.5% in bitcoin. Venmo allows users of its credit card (opens in new tab) Buy crypto with the rewards earned from 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, while the value of crypto rewards fluctuates with the value of that digital token at any given point in time. For example, a credit card with 2% cashback means you can get $20 in credit for a $1000 purchase. A credit card (or crypto rewards program) that returns 2% in bitcoin means you get $20 from it. Twenty dollars could have bought you 0.00029 BTC on November 8, 2021 and 0.0011 BTC on November 8, 2022 – about 70% down due to Bitcoin’s significant drop in value over the past year.
Given the volatility of crypto, this is very important as your actual payback can be much smaller (or larger) when you eventually decide to trade or spend the crypto you earn.
Another thing to note is that crypto rewards may come with a tax bill. With regular credit card rewards or other rewards programs, you will not incur any tax consequences for redeeming them. But when customers redeem cryptocurrency in any form, they may owe taxes to the IRS Because the agency treats cryptocurrencies as property, every sale of a digital asset triggers a capital gain or loss.