If you think cryptocurrencies are a good long-term investment, a rewards program like Lolli or a cashback credit card that lets you earn crypto while spending money can help you ease your way into the crypto market. But even if you don’t fully get into cryptocurrency this way, it’s still important to keep in mind the additional risk and volatility involved.
Crypto Rewards Programs
Lolli (opens in a new tab) allows shoppers to earn up to 30% in Bitcoin rewards when they shop online at any of their partner merchants, 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% in Bitcoin for in-store purchase at select merchants, such as American Eagle, CVS, and Shake Shack. RewardsBunny (opens in a 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. Bend allows customers to earn up to 20% in Bitcoin rewards by offering gift cards that can be purchased on its 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 (PIECE OF MONEY) all offer debit and credit cards through which customers can earn cryptocurrency rewards for spending money. These cards allow customers to directly earn cryptocurrency or reward points that can be redeemed for crypto. Most of these cards offer 1.5% or 2% rewards on most purchases, while some offer higher rewards for certain types of purchases, such as meals or groceries.
A few fintech 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 turn them into crypto when deposited into a SoFi Crypto account. Upgrade Inc. offers a credit card which earns a fixed income of 1.5% in Bitcoin. Venmo allows users of its credit card (opens in a 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, while the value of crypto rewards fluctuates with the value of that digital token at any given time. For example, a credit card that offers 2% cash back means you can receive a $20 credit for a $1,000 purchase. A credit card (or crypto rewards program) that offers 2% back in Bitcoin means you’ll get $20 back. Twenty dollars could have bought you 0.00029 BTC on November 8, 2021 and 0.0011 BTC on November 8, 2022 – about 70% less due to Bitcoin’s substantial decline in value over the past year.
Given the volatility of crypto, this is something very important to keep in mind because your actual ROI may be much smaller (or larger) when you ultimately choose to trade or spend the crypto you have earned.
Another thing to keep in mind is that crypto rewards may come with a tax bill. With regular credit card rewards or any other rewards program, you face no tax consequences for redeeming them. But if customers use cryptocurrency in any form, they may owe taxes to the IRS as the agency treats cryptocurrency like property, each time a digital asset is sold, it triggers a capital gain or loss.