Crypto-Spend Debit Card Rewards Go Back to Earth

Slowly, the crypto-back rewards on Visa and Mastercard debit cards that let you spend your cryptocurrency holdings at checkout and point-of-sale are coming back to earth.

By and large, they work just like cash-back programs, except that instead of U.S. dollars you get a reward in bitcoin, ether, or a number of other small, less-well-known cryptocurrencies.

Also, in many cases, the rewards you can get are far higher. Or seem to be anyway.

The Visa debit card issued by Nasdaq-listed cryptocurrency exchange Coinbase was recently offering 5% on all spending, while the Crypto.com exchange was offering 8% to its top-tier cardholders, as was the world’s largest exchange, Binance (which doesn’t operate in the U.S.)

The cards definitely have appeal, with Visa saying in July that spending on crypto debit cards passed $1 billion in the first half of 2022. So they are popular with crypto owners.

Read also: Issuers Rush To Meet Consumer Demand For ‘Cash Back’ Crypto Cards, Despite Volatility And Risk

Yes, But …

However, some mighty big asterisks are starting to appear.

Coinbase was only offering that rate if you took your rewards in Stellar Lumens tokens (XLM), rather than bitcoin, which was only offering 1%.

Crypto.com’s 8% rate only went to cardholders in the top of five tiers who held about $360,000 worth of the exchange’s own CRO token on deposit. The exchange’s CEO, Kris Marszalek, announced it was lowering that top rate from 8% to 2% in early May, dropping rewards on its other four tiers even more drastically.

Read also: Crypto.com Discovers That Loyalty Programs Are a Two-Way Street

The decision to reduce cashback rates and introduce monthly reward caps was “to move closer to long-term sustainability of our card program,” he tweeted on May 1.

That decision lasted about a day, with the top rate going up to 5% and lower tiers bouncing to 3%, 1.5%, 0.5% and 0%, with tiers three and four capped at $50 and $25 in rewards per month.

Binance’s 8% is only for people with at least 600 of its BNB tokens — currently worth about $312 each — in their account. Without any BNB, the cashback rate on spending any crypto in the account linked to your debit card is 0.1%, although it goes up to 2% at one BNB.

BlockFi’s Visa debit card recently lowered its flat 2% to 1.5%, although it bumps back up at $30,000 annual spend.

Too Good to be True

While there were some cards offering rewards that sounded too good to be true, that’s starting to die off. Largely because it was all too good to be true.

Last November, Crypto trading and lending platform Voyager Digital announced that its Mastercard debit cards would be offering a 9% crypto rewards card — 10.5% if you were enrolled in the trading platform’s loyalty program — on USDC stablecoins held on your card.

That rate was financed not by the money it earned on the cards — they’re debit cards, after all, so consumers weren’t paying interest — but rather from “marketing spend,” Voyager CEO Steve Ehrlich told PYMNTS Karen Webster.

See more: Mastercard, Voyager Team to Make USDC Stablecoin Spendable and Mainstream

That yield was funded from its other business lines, Ehrlich said, calling it “fertilizer” for attracting new account holders.

Voyager halted withdrawals and then entered bankruptcy In July, freezing customers’ assets, which it has said will likely be impaired. That doesn’t sound all that rewarding.

See more: How a Stablecoin’s $48B Collapse Rippled Across Crypto