A Bitcoin Credit Card

By far, the biggest news of the past week in credit cards was the announcement by cryptocurrency startup BlockFi that they would be releasing a credit card with bitcoin-based rewards in partnership with Deserve and Evolve Bank & Trust. While just a waitlist at this point, based on the partners included in the announcement and the card design on the waitlist page, this is the real deal, and it’s coming soon.

In the past, bitcoin-related cards have focused on allowing consumers to access bitcoin balances with debit cards to pay for things in real life where the merchant doesn’t accept bitcoin. Shift Payments pioneered this with a Japanese-issued debit card in 2014. I covered Coinbase’s new debit card in CardsFTW #7 just a few weeks back.

The new BlockFi card looks and acts like a typical premium credit card:

• Earn 1.5% cashback, in the form of bitcoin, with every purchase
• Earn a $250 signup bonus when you spend $3,000 on the card in the first 90 days
• Carries a $200 annual fee

Other fees and APRs weren’t listed, but based on other Deserve cards (including the one my company issues with them, the Grand Reserve World Mastercard), they are likely to be on the average side, with reasonable fees and APRs from the mid-teens to low-20s.

This announcement is exciting on many fronts:

1. Yay–another credit card that isn’t airline/travel points
2. First card with the bitcoin logo on it, recognizing more acceptance of cryptocurrencies by traditional firms
3. First card issued by Evolve Bank & Trust with Deserve
4. First card issued on Visa by Deserve

As readers know, I love new and innovative cards, and this one certainly fits the bill.

I will be interested to see how consumer adoption proceeds. In general, people who love bitcoin love bitcoin. There is a vast, built-in audience here. On the other hand, I think the $200 annual fee and standard rewards are not that compelling. The upside of bitcoin is that if the price goes up, that 1.5% cashback could be worth a lot in bitcoin! On the downside, if the price goes down, then the rewards could be weak. I’m curious if rewards will be issued daily, monthly, or on-demand, and how the conversion works for turning that cashback into bitcoin.

Of course, a user could get a regular cashback card and then dedicate that cashback to bitcoin. If this card automatically moves cashback to bitcoin, it could do an excellent job of performing dollar-cost averaging investments to bitcoin. (Bitcoin is more of a store of value for most people than a payment currency due to its volatility.)

Overall, this is an exciting and positive development for both the bitcoin and the nascent challenger credit card industry.

Vital Card Fundraises

Speaking of challenger credit cards, the team at Vital is back. Vital Card (not to be confused with Vital Farms, maker of ethical eggs) is a startup aiming to launch a challenger credit card that rewards cardholders for taking certain activities and describes itself as the first social card. Last week they launched a crowdfunding campaign on StartEngine. I couldn’t resist the pitch and look forward to being a very small shareholder.

I first heard about Vital in early 2018, and they have had a challenging time finding an issuing partner. Their crowdfunding documents show that Vital will partner with Evolve Bank & Trust (one of the fastest-growing fintech-friendly banks). Having an issuer is a huge deal and bodes well for them to launch in 2021, as noted in their plan.

Vital reminds me of the Zero card, which rewarded consumers for referring other people to the card, often through social media. Zero had some challenges, in that the top referrers had a huge incentive to spend on the card, earning 3% cashback, while new users did not (1% cashback), causing high rewards expenses. Also, financial services and social media haven’t always gone well together (blippy, anyone?) because people like to keep their finances private. The team at Zero pivoted to a neobank called Level earlier this year.

Another challenger card is a good thing in my mind, and I wish the team the best in getting their card to market (especially as an investor!).

Airline Cards Aren’t What They Used to Be

I’m not alone in thinking that travel cards have limited worth. Last week, the Wall Street Journal ran a story about how COVID has reduced their value. Even in the before times, more than a third of all credit card rewards remain unredeemed. If you need a helpful site like The Points Guy to teach you how to use your credit card, maybe the product itself is just too complicated. Travel is appealing, and it is an exciting event to take a trip. However, for most consumers, the ability to earn enough points to take a free family vacation is far out of reach (at least without advanced credit card churning tactics from the TPG crowd).

Online Shopping is Where Cards Thrive

Whether you use an airline card, a bitcoin card, or something else, they make it possible to shop online. Visa reported that online shopping spend is up 27% year-on-year while in-store spend dropped. JP Morgan said that card payments surged 15% alone over Black Friday Weekend. According to a Bloomberg report, Monday’s sales last week were up 27% for online and mobile authorizations than the same day the previous year, while in-store payments dropped 12%. Good work, everyone who stayed home! Thank goodness for credit and debit cards.

Card Materials Evolution

In CardsFTW #5, we talked about Ecosia’s Tree Card made from cherry wood. European challenger bank Tomorrow also offers a wooden card (also cherry, presumably from the same manufacturer). In addition we are starting to see more in the way of recycled or more environmentally-friendly plastics. This week global payments company Sokin announced they would make card manufacturer IDEMIA’s recycled Greenpay available in all of their geographies.

None of these payment devices will be recyclable themselves; they still have an EMV chip and RFID antenna in them, along with a magnetic stripe. However, using wood or recycled plastic does reduce the demand for new plastic generation and creates positive demand for carbon-sequestering trees or recycled plastic. Environmentally friendly cards have long been a goal of the industry (we tested recycled PVC cards at Green Dot in 2008), and it is exciting to see that many problems we had with recycled cards are being solved.

CardsFTW

Thanks for reading CardsFTW, a weekly newsletter about all things debit and credit. CardsFTW is written and curated by Matthew Goldman, Founder, and CEO at Vertical Finance, a challenger credit card startup. If you're looking for insights into everyday payments beyond deal blogs, please subscribe for free at cardsftw.substack.com. If you enjoyed this, please share it with a friend! Follow me on Twitter @magoldman.