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If you were not living under a rock for the last decade, you must know how popular cryptocurrencies have become. And as days go by, the crypto industry becomes more accepted into everyday finance and transactions. One example of that is the onset of Crypto Cards for everyday or real-world use cases.
A crypto card works just like a traditional debit/credit card, but here the funds are drawn from your digital asset holdings and then converted to fiat during the time of processing the payment. This article will help you understand the basic flow of how a transaction is processed from crypto to fiat inside a crypto card.
When you use your crypto card, the card provider will automatically convert the crypto, such as Bitcoin, USDT, or USDC, to the fiat currency the merchant accepts. It is important to note here that this conversion is based on the real-time market value of the cryptocurrency that is being used here for the trade.
So this automatically affects the price of the final transaction. Crypto card payments help you skip a step by letting you first sell crypto to get fiat before making a purchase.
Payment gateways like Visa, MasterCard and Swipe have launched many programs of their own crypto cards and have also partnered with crypto exchanges to make these crypto cards work.
So when a customer pays with a crypto card, it is actually the crypto card’s partner payment processor that is allowing the payment. This makes the process smoother.
Once the card is inserted or tapped, the merchant will send an authorization request over Visa or MasterCard in the same way as for a regular card and will check for the available funds in your digital assets holdings. It also runs a fraud or risk check.
Once this is approved, the app for that crypto card will sell whichever asset you choose and convert it to fiat to your card. Here, you may expect a conversion fee, and if your chosen asset is insufficient for the amount required, the app may then choose the next asset in priority.
A crypto card can be used just about anywhere to pay for online or in-person purchases and can be converted into fiat. Other crypto cards give points for paying in fiat that can be redeemed for crypto.
They can also be used to withdraw cash from ATMs that support this currency, which is also a very practical way of using these cards.
Different crypto cards fund purchases in different ways. Knowing the types will help you understand how conversion fees, rewards, and even taxes will work.
Just like a traditional debit card, here you spend what you already hold in your crypto wallet. Every time you purchase something, it triggers a conversion from your chosen asset into fiat, which is then used to settle that payment.
This works like a traditional credit product where the issuer funds fiat at checkout and the user is required to pay later. These type of cards also helps users to earn bigger rewards in crypto.
These types of cards are best suited for online payments or instant activation. Here, there is an instant card number that is issued in the app for online or wallet use. Works pretty much identically to how physical cards work, but you gain speed and security here.
Crypto cards have indeed made everyday use of cryptocurrency like Bitcoin and stablecoins quite easy and smooth. However, like any other card, they come with their own pros and cons. The table below will help you to understand better.
The modern crypto cards in the market today include multiple layers of protection that are designed to safeguard users’ funds and prevent unauthorised transactions. This includes-
While using digital assets as a payment method, one thing that users should keep in mind is how to handle the volatility factor of cryptocurrencies. Some of the things that users can do are-
The invention of crypto cards is probably one of the best ways to use your digital assets in real-world use cases. And to get the best results from it, one should consider their usage habits.
Crypto cards are best suited for international payments for big tech purchases. One should also be very careful with regional regulation support and network compatibility. Always review conversion fees, ATM charges, and any FX costs to avoid surprises.
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