While most of us know what a debit card is, it is still worth defining, as a crypto debit card is based on the same premise. A debit card is a plastic card with your relevant account information embedded into the card via a chip or scannable barcode. Unlike a credit card, a debit card allows you to electronically pay for goods or services with the money in the attached account.
In essence, a debit card connects processing companies with your checking account, allowing merchants to process payments using the funds in your account. As for a crypto debit card, well—it’s exactly what it sounds like. A crypto debit card connects a cryptocurrency payment processing company with your crypto wallet. This type of card enables you to settle transactions at any merchant that accepts debit cards using the funds in your crypto wallet.
A big difference between a crypto debit card and a traditional debit card is that a crypto debit card automatically converts the crypto you’ll be spending into the preferred fiat currency.
Using cryptocurrency in the real world today still has its limitations. You can’t walk into any shop and pay for your order with Bitcoin, as most merchants are still unwilling to accept crypto as a payment method.
Retailers are cautious about digital currencies for several reasons, including uncertain legal status of payment processors, exchange rate volatility, and an underdeveloped understanding of blockchain and the cryptocurrencies powering technology for most of the general public.
Thankfully, crypto debit cards and other “traditional” financial products seek to further legitimize cryptocurrency as valid forms of payment.
How do they do this?
Here’s an example:
John walks into a local coffee shop that, like most, accepts debit cards. Because a Bitcoin debit card works just like the one you get from your local bank, John has the choice to use his regular debit card or the brand new crypto-based debit card.
John decides to give his crypto debit card a test run. While the coffee shop does not accept cryptocurrency, it certainly takes debit payments. The cashier hands John his cup of coffee, swipes the card and hands him his receipt.
When the cashier swiped the card, the processing company reached into the card’s crypto wallet and took the dollar amount of crypto needed for the cup of coffee. The processing company then converted the crypto into regular fiat currency and delivered it directly into the coffee shop’s account. This all happened in a matter of seconds, and highlights one more way that crypto is becoming an accessible form of payment in the real world.
Few things to consider when using a crypto debit card
Is the service available in your geographic location?
Do you have to pay tax on your crypto debit card transactions?
What are the supported cryptocurrencies?
What are the fees and exchange rates that apply towards each transaction?
