Crypto Is on a Run. Is Now the Time to Get a Crypto Credit Card?

Crypto is seemingly on another tear. Bitcoin recently reached a major milestone, breaking through $100,000 for the first time in December. If you're looking to get in on the bitcoin craze, a crypto credit card is one way to earn cryptocurrency.

Bitcoin has seen a meteoric rise over the past few months, but cryptocurrency remains highly volatile. That means you shouldn't invest more in it than you're willing to lose. With a crypto credit card, you can earn cryptocurrency more passively, making it a lower risk way to invest in crypto.

Sound good? Crypto credit cards seem appealing, but they're not for everyone, and there aren't many to choose from. Here's what you should know before going all in on a crypto card.

A brief look back

Rewind to 2020 and 2021 when much of the world was locked down and crypto was taking off. Bitcoin -- the digital currency that was once worth around $1 a decade earlier -- was seesawing between $30,000 and $60,000. 

As money piled into the digital currency space, credit card rewards started to look a lot different. Upgrade and BlockFi began offering cards with crypto redemption opportunities.

Then, just as quickly as crypto caught fire, it cooled off. Upgrade discontinued their crypto offerings. BlockFi went bankrupt. The home court of the Miami Heat needed an emergency rebrand when FTX -- the arena's brief sponsor -- imploded. The crypto winter put a serious freeze on the ability to turn your everyday spending into something other than cash, miles or points. 

Now, the incoming Trump administration has given crypto a headwind to ride on, as President-elect Donald Trump indicated on the campaign trail to have a more positive disposition toward crypto than the current administration.

What is a crypto credit card?

Crypto credit cards give cardholders the ability to earn and spend cryptocurrency. Instead of earning straightforward cash back, crypto credit cards convert bonus rewards -- 3% cash back at a restaurant, for example -- into the equivalent value of a cryptocurrency.

However, since cryptocurrency is a type of investment, when you spend the crypto, you earn with a card, it triggers a taxable event with the IRS. That means each time you swipe, you'll need to keep track of your transactions to pay taxes on them during tax season.

Meet the Gemini and Venmo cards, your two best options for a crypto card

While the crypto credit card space started to get crowded in 2021, true crypto credit cards -- not prepaid cards or debit cards that offer crypto rewards, which are more widely available -- aren't very common right now. These aren't just your two best options; they're your onlyoptions.

Gemini Credit Card

See at Gemini

Annual fee: None
Welcome bonus: $200 in crypto after spending $3,000 in first 90 days.
Rewards:

• 4% back on $200 of gas and EV charging purchases per month
• 3% back on dining
• 2% back on groceries
• 1% back on all other purchases
  

Notable features: Ability to earn rewards in more than 50 types of crypto on the Gemini Exchange Instant reward transfers

See at Gemini

The Gemini Credit Card* launched in the spring of 2022, and it's managed to stick around much longer than most of its original competition. The card works similarly to most traditional credit cards in terms of its structure, which includes a welcome bonus and bonus spending categories. The difference is that your rewards are automatically transferred to a cryptocurrency of your choice.

While Gemini's top earning category has a very low maximum spend of just $200, the card's bonus categories feel similar to some of the best no-annual-fee credit cards on the market.

Venmo Credit Card

See at Venmo

Annual fee: None
Welcome bonus: None
Rewards:

• 3% in the top monthly spending category
• 2% in the next highest spending category
• 1% on all other purchases
  

Notable features: Ability to switch back to standard cash back

See at Venmo

Venmo may have made a name for itself for its convenient ability to transfer money to friends and family, but the Venmo Credit Card* is worth a look too. 

However, there are a few notable drawbacks compared with the Gemini Credit Card. Venmo limits your crypto rewards to four options: bitcoin, litecoin, bitcoin cash and ethereum. Additionally, you'll have to wait to see rewards transferred until the end of your statement cycle, which doesn't let you capitalize on potential price appreciation.

What's different about a crypto credit card instead of earning points or miles?

If you're carrying a travel credit card like the Chase Sapphire Preferred, the rewards you earn won't change much in value, unless you're transferring them to one of Chase's travel partners. 

Crypto credit cards are different. How much your rewards are worth can be quite volatile; rather than always being worth 1 cent per point, it could be worth more or less depending on the crypto market. You might hold on to your crypto rewards longer than you would with a traditional credit card, since the value fluctuates.

Ted Rossman, senior industry analyst at Bankrate, said that someone who typically earns around $2,000 cash back each year would see a $200 jump if the crypto of their choosing increased by 10%. Keep in mind that to earn $2,000 cash back in a year, with a card that earns 3% back, you'd need to spend nearly $67,000.

"The main appeal of crypto is the potential for exponential growth," Rossman said. "If it goes to nothing, the worst thing that happens is you lose your credit card rewards."

There's another big difference: how rewards are taxed. Traditional rewards cards won't create any need for a conversation with a tax professional. The IRS isn't monitoring how many hotel points and airline miles you're earning each year. With crypto cards, you may need to pay capital gains taxes, which vary based on your income and the length of time you hold on to them. 

Risks of using a crypto card

• You won't have insurance: If you earn cash back that you deposit into a bank account, that money is covered by FDIC or NCUA insurance. With crypto, that money doesn't have any government-backed protection. If the company fails or you wind up falling for a scam that involves sending crypto to a bad actor, you're not going to get it back. To better protect it, you're going to need to learn about the nuances of hot and cold crypto wallets.
• You're not going to be able to do much with your rewards: If you're accustomed to traditional credit card programs, you might enjoy the ease of receiving a statement credit or buying a gift card. Crypto, for now, is almost impossible to spend. You're not going to be able to pay for your dinner tonight in dogecoin.
• Your choices will be limited: Sure, you're familiar with bitcoin, but what about XRP, cardano and uniswap -- all of which increased by more than 10% in the 24-hour period between when I started writing and finishing this article. There are around 11,000 cryptocurrencies, according to Coinbase, but your reward redemption options are going to be limited to just a few. 
• The industry is riddled with past problems: Crypto has encountered some serious bumps in the road recently. Sam Bankman-Fried, the founder of FTX, is at the beginning of a 25-year prison sentence for his role in a massive scheme, and companies like Celsius and Voyager Digital joined BlockFi in the bankruptcy lineup. In 2023, Americans lost around $5.6 billion to crypto-related scams.

Tips to consider before applying for a crypto credit card

Like any credit product, it's important to consider how you plan to use the product and what you aim to get out of it. However, because crypto cards are usually a bit more complicated than standard credit cards, you should keep these tips in mind: 

• Look at the rest of the products and fee schedules: If you're focused on also putting your additional funds into the crypto space, you'll want to compare the broader product offerings and how much it costs to purchase and sell crypto. "Gemini is hoping that a credit card will tie you into their ecosystem," Rossman said. 
• Analyze your spending habits: Look at your regular expenses to determine how much you're likely to earn. Venmo's rewards structure offers an appealing ability to automatically update your spending categories every month. This may be able to outpace Gemini's predetermined structure, which favors dining out and groceries (along with the limited higher payout for gas and EV charging).
• Don't rush: With just Gemini and Venmo, your choices are fairly limited right now. However, Rossman expects that may shift in the near future, which means it may be worth waiting to see what's on the horizon. "I could see this catching on more," he said. "The Trump administration has a crypto-friendly stance, and we could see some more innovation in the space."

*All information about the Gemini Credit Card and the Venmo Credit Card has been collected independently by CNET and has not been reviewed by the issuer.