The Takeaway
- BlockFi will be first to market with a Bitcoin-reward credit card (unlike the many debit cards out there)
- 1.5% reward rate in BTC and teaser spending bonuses make this an excellent option if you spend $3000 in the first 3 months
- The annual fee of $200 requires that in order to keep this card after that, you must (a) spend $1100/month at minimum and (b) be long-term bullish on BTC
- Read on for the Full Analysis!
I really have two central motivations for diving into cryptocurrency. The first is to have fun. It might sound crazy, but there are other ways of making money than through buying into cryptoworld. But crypto is WAY more fun! The second is to get appealing returns with minimal effort...as close to passive income as I can get.
For me, credit cards have been a place where both of those interests came together in the past, and I one of the lures that drew me into cryptoworld was an ad I saw for the BlockFi Credit Card back in December 2020 (surprisingly, the other was BRAVE browser, which I write about here). I got a ton of value out of my past fling with travel reward credit cards, finding ways to get much more value than the 2%, 3%, or 5% cashback they promised. As a little snapshot of what 5 years of dabbling did for me, even well after the glory days of travel hacking were long past, I've taken my wife to overwater bungalows in Bora Bora, my family to suites at Park Hyatts and Intercontinental Hotels in glamorous capital cities around the world, dined off chef's menus in exclusive airport lounges, had $300 a bottle champagne in glass flutes on the tarmac, and flown more than 500,000 miles in international business and first class to 20+ countries...all for free. Literally free. So I never underestimate the power that wise use of credit cards can put in a normal dude's hands! But it takes the right card, used for the right reasons, with the right rewards structure to work.
"World's First Cryptocurrency Credit Card"
You are surely hearing more about the BlockFi credit card lately. That's for two reasons. First, BlockFi has announced new details about their forthcoming card, and bloggers love when we get to dig into new details about stuff! Second, and probably more important to the surge in stories, is that the wait list for the card opened to people who don't have accounts with BlockFi. People are justifiably curious about "the world's first cryptocurrency credit card." as some bloggers have been very transparent about, there is a $30 referral bonus (HT: John Wege, who I follow), presumably if you successfully apply for the credit card (though I can't find it in my account, I believe those who have posted about it). I would love it if you would use my referral for this, as I actually do like BlockFi - it's my speed! The second incentive is that through some magic formula, gaining referrals will move us higher on the waiting list. I think if this incentive is driving people to pump this card, that is a crazy. Credit cards can mess you up if you don't use them correctly. Plus, at the time of writing I am #41,000 or so out of more than 131,000 peeps. That might sound like a lot but most major credit card issuers count on millions of cardholders for every card they offer. I think everyone who wants one, and meets their requirements, will get one.
But should I, or you, or anyone want this card? I will use the same approach I applied to travel rewards credit cards to evaluate this offer.
Before we get into that part, a quick word about credit cards vs. debit cards. Debit cards have fewer consumer protections, require an active consumer balance in order to make purchases, and deliver higher fees to banks in some circumstances, which is why they like them (typical swipe-to-purchase at stores for example). So, you are easier to rip off, it is harder to get your money back if you do, but you can only lose what you have, and for buying crypto online, I think the fees are lower. Credit cards provide substantial consumer protections, sometimes even price protection, where if you buy something and the price drops you can get a statement credit for the differences. They usually have more benefits (one big one in travel credit cards is access to airport lounges, or insurance coverage for rental cars, for example), unlike debit cards they build your credit history and can be used more effectively to increase your credit score. And, very importantly, unlike debit cards, which can only drain your bank account to $0, credit cards if misused can drain your bank account to -infinity and destroy your financial future. Never, ever, ever spend more on a credit card than you know 100% you can pay off on the next statement. You might disagree, but I think it is stupid risky to overspend on credit cards - the best cards in the world offer 5% rewards rates in select categories, and will charge you 24% interest on unpaid balance. Come on!
OK, with that warning out of the way, what are the key Benefits of the BlockFi Credit Card, how much do you have to pay to get those benefits, and when does it make sense to grab it?
BlockFi - My Oh My or Why Oh Why?
Let's start with the benefits because if there are no benefits then it can piss off, right?
#1 The Killer Benefit: 1.5% rewards rate, paid in BTC
#2 The Ecosystem Benefit: There is a great ecosystem benefit for passive earners, which is that BlockFi pays out in-kind interest on crypto deposits. The rates are calculated monthly and of course can change any time but stands at 6%. From the the perspective of a traditional money person, this is a fantastic use case. For example, a great credit card with similar structure is the Fidelity Rewards card, which pays 2% on everything and feed rewards into a variety of accounts, the most basic being a cash management account that earns 0.25% interest. The effective rate is still just 2% and inflation poops on the face of your cash balance every day. The effective rewards rate of the BlockFi card can be calculated as R = (1.5% x purchase) x 6%, which will be 1.6% over a year. This is tiny for people who are liquidity farming at 1,000,000% every second, but great for a boring, pay-your-bills-and-never-think-about-it-again dude. Of course this could all change and if you are a whale of a spender, you might exceed their BTC holdings tier structure and start earning lower rates. But if we track a typical purchase, let's say $200 in groceries over two billing cycles, you would earn $3 in BTC right away, when your statement balance comes due you bay that frigging thing off instantly (!!!!), and you will receive amortized credit for that $3 at 6% for the month, which would compound from there. If you have a long time horizon, 6% means something along the lines of doubling up every 9 or 10 years.
#3 The Teaser Benefit: 3.5% rewards rate, paid in BTC, on all purchases during the first 4-6 months. I don't know wtf about the "4-6 month" range. That's weird, but you can earn up to $100 worth of BTC that way. At 3.5% return, this teaser benefit will cover your first $2,857.14 in purchases. If we round up to $3000, we get awfully close to...
#4 The Other Teaser Benefit: $250 of BTC if you spend $3000 in the first 3 months. This $3000 in 3 months places this credit card squarely in the mid-tier rewards card category.
#5 Other Benefits that Might Apply: It looks like they are advertising this as a "Visa Signature" card which means that Visa will confer a stable of benefits to all cardholders (you can see the list here). Beyond that, if you carry other balances and/or trade with BlockFi, you can earn a bit extra as a cardholder. This also is pretty standard stuff for branded rewards cards. For example, with an airlines card, your possession of that card often unlocks special uses of the miles (e.g., pay with miles @ 1 cent per is a very common benefit), with a high end bank card (think investment houses) you can often have fees wiaved or get access to accounts with more perks, get free trades, etc. My main BlockFi strategy is to store some stablecoin there and get interest in BTC or ETH. So, I would eventually benefit from the extra 2% APY on stablecoin balances. I don't trade really at all on that platform, so the 0.25% in BTC back on trades doesn't sway me.
OK, now we're ready for the costs and drawbacks.
#1 The Kicker: $200 annual fee, not waived. This is another indicator that this is positioned as a mid-tier rewards card, comparable to lots of travel rewards cards, like AmEx Gold and similar.
#2 The I Volatile Rewards Currency: Who knows whether BTC will hold its value? The real comparison here is does it hold its value relative to fiat because there are many great 2% fiat cashback rewards cards.
#3 The Little Things: Opportunity cost, cash advance fees, and credit pulls. You might get more value out of a Bitcoin debit card, which is an opportunity cost every time you use this card. You will almost certainly pay a 5% fee with $10 minimum fee for buying crypto through exchanges, as most issuers count these as cash advances. And, finally, applying for a credit card requires a hard pull of your credit report, which lowers your credit score for a few months. Other than that, for me, #1 and #2 are the only considerations as I like the increased protections and perks of a credit card over the risk of debit card transactions.
Calculating the Value of the Costs/Benefits
And now, the moment you have been waiting for!
We have to assume a base level of spending. Let's model three different spenders: Lo, Med, and Hi. I'm not going to bother to predict what the price of BTC will be in a year from now. If I could do that, I'd be writing this from my solar powered, sea water filtering super yacht with 30 square meters of hydroponic vertical farm, and an on-board resident mariachi/ranchero band (duh).
Lo Dude spends $600 on the card and forgets he has it (but he at least pays off the balance in full each statement!!!). He gets a total benefit of $600 x (1.5% + 3.5%), so $30 worth of BTC. That $30 earns 6% interest, so at year's end Lo Dude has gained $31.80 worth of BTC. But not so fast! You pay the annual fee up front, so Lo Dude gets murdered by the $200, which he paid back when he was optimistic about being a Bitcoin Hundredaire. Lo Dude lost $168.20. Don't be low dude with this card! (Lo Dude also forgets that his $30 will eventually compound to $200 if everything goes according to plan).
Med Lady spends $3000 on the card in the first year and then goes back to her other cards. She gets a total benefit of $250 for meeting the minimum spend requirement. She gets 1.5% in BTC for the $3000, for another $45, plus the $100 in bonus teaser spending rate. She pays the annual fee out of pocket (-$200) and has gained $395 worth of BTC. If we assume it takes her 3 months to complete the minimum spending, then she will earn 6% reward for 9 months on her BlockFi account for a total BTC value of $413 for Med Lady, acquired at a cost of $200. Like Lo Dude, she will continue to earn 6% or whatever rate BlockFi changes to over time.
Hi Rollers spend $1500 per month (I know that this is really not High Rolling spending in the credit card rewards world, but I want to keep it simple) on the card, meaning they get the $250 + $45 + the $100 that Med Lady got in teaser and minimum spending. Hi Rollers spent a total of $18,000 in the first year, with $15,000 falling under normal, non-teaser spend at 1.5%, which would gain $225 if spent all at once, but would be less because we're spacing this spending out on a monthly basis. So for Hi Roller, the important analysis isn't what happens in Year 1, it's what the start of Year 2 looks like when we're staring at the annual fee again. Hi Rollers are starting Year 2 with a total of $395 (Med Lady level spend) + $225 in BTC, which will earn another $37.20 in rewards in Year 2 even if they don't spend another penny. Hi Rollers could mentally count this toward the annual fee if they want. but if they keep up the spending, they can anticipate earning another $225 in direct rewards and another $37.20 or so in interest on those rewards. To my mind, $1500/month is the minimum level of spending to justify keeping this card in the second year - unless you truly are a BTC to $500,000 believer. Otherwise, you probably will do better to sign up for newer products to get sign-up bonuses.
Who Would I Recommend This Card To?
This is a mid-tier branded rewards card in terms of annual fee and teaser benefits. It has a low-tier rewards rate, but provides high-tier rewards currency (BTC) and high-tier in-house account benefits. With this little bit of intel in hand, you can do your own comparisons with similar mid-tier rewards cards and determine which makes the most sense to you. I am assuming that this will require a mid-tier credit score (in US) of 700+.
Speaking personally, I am done with travel rewards cards. COVID made travel nearly impossible and also sucky and the issuers were devaluing their miles and points at a hyperinflationary rate. Just one data point: I took my family on a 5 week trip, flying almost every leg in international Business Class, with something like 20 legs over 6 countries, and it cost me about 700,000 airline miles. Two years later, just getting to Europe for the 4 of us in economy costs 360,000 miles, and trying to get back to Seoul or Tokyo in business class was close to 2 million. Total bullshit system about to get much worse when COVID travel restrictions ease. I am all in on the idea of getting rewards in a currency that can increase in value rather than evaporate before your very eyes!
Right now, about 60% of our monthly spending is on credit cards (Paid off in full using auto-pay every statement cycle). That degree of spend easily will justify the annual fee as long as BTC doesn't crater. It is for you to decide if you are cool with that separate risk of your rewards currency imploding. The annual fee of this card means that you better believe that BTC will hold 80% or so of its value in Year 1 in order for you to make back the annual fee. I am pretty bullish long term on BTC, so this is a no-brainer for me.
So, this card is good to try out for you iff (if and only if):
1. You will spend $3000 on the card in Year 1, AND
2. You are long-term bullish on BTC
This card is good to keep beyond Year 1 iff all of the above PLUS:
3. You will spend $1100 per month on the card
4. You have a BlockFi account set to earn rewards
5. Earning BTC is better for your lifestyle than other mid-tier rewards currencies like fiat, miles, or hotel points.
I am for sure looking forward to Year 1 with the BlockFi Bitcoin Visa Rewards card. Who knows what new competitors might emerge with better products, but count me in, BlockFi!
If you agree that this card is right for you, please use my referral link. Then, you could share my analysis with your friend and refer them to gain that benefit yourself!
If you don't like the sounds of this card, but are interested in starting to earn interest in BTC or ETH for your deposits, you can use a different referral link (of course), and get $10 on your $100 deposit. I am an active user of BlockFi and love the idea that I can put in simple stable coin and get BTC, ETH, LTC, or PAXG (a gold-pegged stablecoin) for free as rewards.
Either way, good luck with your cryptoplans, and thanks for reading my analysis!
