While some understand Bitcoin as a revolutionary new digital currency that is anonymous and secure, not everyone is comfortable enough with the cryptocurrency to accept payment through the blockchain.
This is problematic for Bitcoin users since the point of owning units of currency — such as Bitcoins — is to be able to make purchases. A currency that is not easy to use and is not widely accepted will not remain a currency for long.
However, in response to some merchants not accepting payment via Bitcoin, debit/prepaid cards that interface with the currency have emerged to help users make purchases anywhere credit and debit cards can be used. This is good for the individual user (since the Bitcoins can be spent anywhere), and it is good for Bitcoin in general (since the debit/prepaid cards make it easier to start using the currency).
Bitcoin Debit/Prepaid Cards
Bitcoin debit/prepaid cards work by bridging the gap between a buyer’s digital Bitcoin wallet and a merchant’s desire to use a standard government-backed currency.
For example, if a Bitcoin user walks into a fast food establishment, he will probably not be able to use his Bitcoins to buy food. Most fast food restaurants do not accept Bitcoins at the moment.
The user is in the frustrating situation of having money yet not being able to spend it.
With a Bitcoin debit/prepaid card, however, the transaction is possible even if the restaurant does not accept Bitcoins.
The Bitcoin debit card will use the existing credit/debit card network to credit the merchant in the local currency. For example, many Bitcoin debit/prepaid cards use the Visa network. For the restaurant, the purchase will register just as it would if the customer used a traditional credit or debit card.
With the help of a Bitcoin debit/prepaid card, the user’s Bitcoins have been converted to the local currency in order to make a purchase. How that conversion takes places depends on whether the card was a debit card or a prepaid card.
Just like traditional prepaid cards, the user must load the card before the purchase is made. The user decides how much money (in Bitcoins) to load onto the card. The card’s issuer converts the user’s Bitcoins to the card’s currency — United States dollars, for example.
Once the card is loaded, it functions just like any other prepaid debit card. With prepaid cards, the funds must be loaded to the card before the point-of-sale; however, with many cards, the funds can be loaded immediately before the sale. There is not a waiting period.
Bitcoin users are familiar with the concept of a digital wallet. This is the way that users store, access, and manage the cryptographic keys that control their Bitcoins.
A Bitcoin debit card is linked to a user’s digital wallet. Once this link is established, the Bitcoin debit card functions just like any other debit card. When the user makes a purchase, the merchant is credited in the local currency. At the same time, the card issuer draws an appropriate value in Bitcoins from the user’s linked digital wallet.
One thing to keep in mind, though, is that Bitcoin debit cards often only work with digital wallets offered by the card’s issuer.
Bitcoin Debit Card Options
Many different companies offer Bitcoin debit/prepaid cards. These cards all use different means to achieve the same goal: crediting a merchant in a local currency while debiting a customer’s digital Bitcoin wallet.
In general, the following fees are charged to the owner of the Bitcoin debit/prepaid card:
- Initial purchase of the debit/prepaid card
- Monthly service fee
- Loading fee
Most of the companies follow a similar fee model, but the exact differences and fees are numerous. Furthermore, these fees change often. For more information on the individual fees associated with acquiring and using a specific Bitcoin debit/prepaid card, please visit the company’s website.
The following are some of the most prominent companies in the Bitcoin debit/prepaid card market:
According to Cryptopay’s website:
“The Cryptopay Debit card is a full blown VISA debit card you can top up instantly from your Cryptopay account. It is accepted anywhere VISA is accepted, and can also be used for ATM withdrawals. You can order a Euro, US Dollar or Pound debit card for €15 /$15/£15 respectively.”
Since Cryptopay also offers a Bitcoin digital wallet, users can also buy Bitcoins through Cryptopay’s suite of services. Connected to a user’s Cryptopay account, the card can be loaded on-demand.
Card Price: $15.00
Monthly Service Fee: $1.00
Loading Fee: 1%
Other Features: No ID verification required, works online or offline, online-only version available
Founded in 2011, BitPay also offers a Bitcoin Prepaid Visa card that works on the Visa network. The card is available to residents of the United States.
The card is subject to United States banking laws, so users must provide full identification.
Users can load the card with dollars from any Bitcoin wallet and even via direct deposit from an employer. Since this card is a prepaid card, users must load funds onto the card before the point of sale. According to BitPay’s website, “This means you can’t spend more than the balance at any given time.” Furthermore, the BitPay Prepaid Visa card keeps currency on the card in United States dollars. While the funds loaded onto the card can originate as Bitcoins, the value stored on the card will be in dollars.
As with any prepaid debit card, only funds that are loaded onto the card can be expended.
Card Price: $9.95
Monthly Service Fee: See schedule of fees
Loading Fee: “Varies by location; up to $4.95 per load”
Other Features: Can be loaded with dollars from employer’s direct deposit, no transaction fees within the United States, high daily spending and balance limits ($10,000 and $25,000 respectively) compared to some competitors.
For those who are bold and who seek anonymity, BitPlastic offers a Bitcoin prepaid card with few questions asked. The company and the card are designed to allow users to anonymously load funds onto it without linking the card to the user’s real identity. Like many other card issuers, BitPlastic offers a Bitcoin wallet as well.
Also, if the card is lost, the funds cannot be recovered. If the card is locked due to incorrect PIN entries, BitPlastic cannot unlock the card, and the funds will be inaccessible.
Card Price: Free if $3,500 processed through the card in one year. Otherwise, a .2btc to .4btc deposit is claimed.
Monthly Service Fee: n/a
Loading Fee: Between 6% and 8%
Other Features: Anonymity at the expense of convenience.
SpectoCoin advertises itself as an “all-in-one solution for Bitcoin.” SpectroCoin offers both a Bitcoin wallet as well as a Bitcoin debit card. According to SpectroCoin’s website, “The card is funded instantly, so you do not have to worry about exchanging your bitcoins in advance.”
SpectroCoin’s ability to function like a true debit card (i.e. the card does not have to be loaded before purchase) is significantly different from some competitors.
Card Price: $9.00
Monthly Service Fee: $1.00
Loading Fee: 1.99% for POS load
Other Features: Unlike some competitors, the card can be used globally. The card functions like a true debit card, rather than a prepaid card.
The Shift Card works in conjunction with the Coinbase digital wallet. The Shift Card does not need to be loaded ahead of time, as value is transferred from Coinbase to the user’s account at the point of sale.
According to Shift’s website, “The Shift Card enables users to spend funds from any store of value he/she controls. We are working hard to enable users to connect everything from bank, airline mile, and alternative currency accounts to their Shift Card.”
Card Price: $10.00
Monthly Service Fee: $0.00
Loading Fee: $0.00 on domestic BTC to USD conversion
Other Features: Card not specific to Bitcoins. Other stores of value can be run through the card as well.
Xapo is another Bitcoin debit card with a global reach. The card is “exclusively a Bitcoin debit card. It is connected directly with your Xapo personal wallet, which is held in bitcoin.”
Card Price: $20.00
Yearly Service Fee: $12.00 (first year is free)
Loading Fee: See Xapo’s Bitcoin Transaction Fees
Other Features: Able to be used in many major countries around the world.
Why Use a Bitcoin Debit/Prepaid Card?
One of the biggest frustrations for Bitcoin users is the inability to make any and all purchases with their Bitcoins. After all, the currency is supposed to allow seamless transfer of value among individuals as well as businesses.
Right now, Bitcoin is in a time of transition. The cryptocurrency has become wildly popular and valuable; however, it can still be difficult to buy something as basic as a hamburger with Bitcoins.
Bitcoin debit/prepaid cards make is easy to spend Bitcoins anywhere. At the grocery store, at the movies, on eBay, or anywhere else — Bitcoin debit/prepaid cards allow users to piggyback on the existing credit card and debit card processing system.
This helps the user because he or she is able to spend Bitcoins, and it also helps Bitcoin as a whole because it makes it easier for the currency to do what is it is supposed to do: transfer value among individuals and businesses easily and seamlessly.