Cryptocurrency cards: pitfalls and safe use

Cryptocurrency cards allow you to pay for purchases with cryptocurrencies, even if the seller does not accept crypto assets directly. What are the pros and cons of such cards and how to use them safely? Today, crypto users in most countries of the world can order and use debit or prepaid crypto cards to quickly convert crypto assets into fiat currency and buy goods and services online, at points of sale or withdraw money from ATMs.. The news portal Coinidol.com collected the most frequent complaints from users of cryptocurrency cards and recommendations for their use with the least problems.. To issue a cryptocurrency card, whether it be Visa or MasterCard, it is necessary to go through the identification procedure (KYC) – this is required by the user agreement with the company issuing cryptocurrency cards. Basic KYC verification consists of: Identity verification, including providing full name, date of birth, copy of passport (almost always). Address Verification – Users must upload one or more utility bills, bank statements or rental agreements (often). Providing information about your monthly / annual income and the source of this income (sometimes). Providing all the required documents and then waiting for them to be verified can take time, especially if the user has just moved, changed jobs, or is requesting a card from another country with documents in a foreign language. During the COVID-19 pandemic and related restrictions, users face great difficulty in collecting all the necessary documents, especially if physical presence is required for their issuance. History Lessons Several companies started offering Bitcoin prepaid and virtual Visa cards issued by Wave Crest Holding back in 2017. These cards were quite popular in Europe. However, in January 2018, Wave Crest Holding announced that it would stop issuing all cryptocurrency cards due to regulatory issues.. Visa immediately terminated the license agreement with Wave Crest Holding, citing persistent non-compliance with company rules. BitPay, Cryptopay.me, Coinsbank, TenX, Wirex and AdvCash customers have lost the ability to use their cryptocurrency cards. It took several months before companies started issuing cards and working with them again.. But, remembering the mistake of the first issuer of crypto-currency cards, these firms were forced to follow the rules of Visa – conducting KYC verification for all users. As a result, users of crypto-currency cards were drawn into the same verification process that accompanies getting a card at a regular bank, which is why some owners of crypto-assets found themselves in unpleasant situations.. Below are the problems faced by cryptocurrency card users. They demonstrate what actions can be misinterpreted by cryptocurrency companies and lead to sanctions that prevent the owner of a cryptocurrency card from using it. Country of Service Regulation of cryptocurrencies varies greatly by country, including taxation rules and the amount of cryptocurrencies that can be converted to fiat. Companies offering crypto cards must have an agreement with a local bank that will conduct transactions with fiat. Therefore, cryptocurrency card users usually have two or more accounts: one managed by a cryptocurrency firm to handle crypto assets, and another at a local bank to store and send fiat money. Often, before buying, users need to exchange cryptocurrency for rubles, US dollars, euros or other national currency. Therefore, many companies offering crypto-currency cards cannot provide services to users in different countries – they simply do not have an agreement with the operating bank or authorities in the client's region. Before ordering a cryptocurrency card, you need to check if it works in the country where the user plans to pay with it. Most companies do not write about this on the main page of the site – usually this information is contained in the FAQ or user reviews. For example, some customers who were planning to use BlockCard's cryptocurrency Visa cards found that as of 2020, the card is only available to US users.. According to the feedback of one of the users: “I opened an account and made the required deposit in order to order a card. Only to understand that we do not have this card in Europe. Since then I can't login anymore. Unable to contact customer service because it requires a login to send a request… looks like I lost my money. Keep this in mind and look for another supplier!”. Verification Difficulties Before using a cryptocurrency card, users must complete all KYC procedures and checks. Refusal to pass identification can be costly. Adv Cash offered its first cryptocurrency Visa cards prior to the introduction of restrictions in 2018. Years later, the firm announced plans to start issuing crypto cards again, subject to KYC checks for all customers, including the provision of copies of identity documents. However, not all users manage to comply with the requirements of the company. One client writes: “They are impossible to please. The five of us tried unsuccessfully to complete the KYC process. They are not satisfied with anything, no matter what you offer. We tried using a scanner, a camera, original PDF documents, and so on.. This is the most difficult account opening process I have ever experienced.. It's not worth the hassle, there are plenty of other services that offer a better and more convenient service.” Users should also be aware that card issuers generally prefer fresh documents, usually issued no later than three to six months ago.. The absence of recently issued documents, such as bank statements, can also cause verification difficulties.. Some cryptocurrency card providers may ask the customer to take a passport photo with the date of the photo to complete the verification. Cryptopay.me, which offers cards to users in Europe and the UK, confirms that such complex verification is “rare but possible.” Language barrier Some services require confirmation of the user's home address using utility bills, lease agreements, bank statements, etc.. However, users report that if the document is written in non-Latin letters, for example, in Russian, it may be rejected. Sometimes the automatic systems that do the verification cannot process Russian, Ukrainian, Greek, or Macedonian to validate the address in a document. Users can try to resolve the issue by contacting customer support or by requesting documents with their address in English from a bank or other institution. Lack of fast customer support Sometimes transactions made through crypto cards can be frozen for various reasons, including suspicious user behavior, technical problems on the platform, high transaction volume, hacker attacks or service failures. The first thing that users do in this case is contact the support service.. But when it comes to cryptocurrency card providers, fast support is not their forte.. Most major banks have a 24/7 hotline for customers, for example, those who want to block their cards in case of loss or theft, as well as physical offices in the customer's country. But crypto card users generally cannot simply call a crypto company or visit their office for clarification or assistance. In case of problems, cryptocurrency card holders can only act promptly on their own, using a mobile application or logging into their account in a browser. Sometimes the solution can be found in the FAQ sections on the issuer's website. For specific questions, users need to create a support ticket. Sometimes you can get a response through the online chat on the platform. However, the average response time is usually a few days.. Users usually have to make several requests explaining their problem before they receive a solution. Cryptocurrency exchange Coinbase is one of the most secure platforms offering a wide range of services, including cryptocurrency cards for US and European citizens. However, users are not always satisfied with the quality of the support service.. Similar complaints are made by users of all other major companies issuing cryptocurrency cards. Problems with mobile applications Technical failures can occur in any mobile application, but a non-functioning payment application can cause a lot of problems for the user. TRASTRA – Crypto Asset Banking Provider and Visa Debit Card Issuer in Europe. Users receive a debit card along with a personal IBAN (international bank account number) for instant transactions. One of the TRASTRA users expressed his dissatisfaction with the work of the mobile application: “The application has not been working for half a day, the company did not even bother to send out a warning to users.” Users must also update the application in a timely manner for it to work correctly.. If the application does not work properly, users cannot use it and their cryptocurrency card. Ethereum-based Monolith wallet developers call it the first non-custodial wallet supporting DeFi tokens in the UK and Europe. Along with the wallet, users receive a Visa debit card. Users can trade crypto assets using the Monolith app on their smartphones. However, despite the stylish design and concept of the project, customers of the service report that the company does not pay due attention to the development of the application, and call it “incredibly slow.” Unexpected changes in terms of service Most users do not expect that after signing an agreement with a service provider, its terms may change over time. However, sometimes it happens. The cryptocurrency market is a fairly new industry. Any new regulatory rules change the way the market works, and its volatility sometimes forces companies to take steps that are unpopular with users.. While some companies try to be as transparent as possible, others take their users by surprise. In December 2020, the SEC filed a lawsuit against Ripple. The company's management was accused of selling unregistered securities for $ 1.3 billion. After that, the delisting of XRP was carried out by the Bittrex, Coinbase, OKcoin exchanges and the American division of Binance.. Some cryptocurrency companies did this quickly and without notifying customers. Nexo promotes itself as the leading regulated financial institution in the world of digital assets. The firm also offers cryptocurrency cards to its users.. Recent problems with Ripple have come as a nasty surprise to Nexo users. One customer stated that the company suddenly and without warning removed the XRP sell button: “Without warning, Nexo removed the ability to sell XRP, the only asset for many app users. This left a large portion of users unable to repay the loan by selling their crypto assets while their price was still high.” The card may not work everywhere Cryptocurrency cards are different from “fiat” cards issued by major banks. Sometimes owners of cryptocurrency cards cannot pay at some points of sale. This is because the card is backed by a local bank, not a global bank, which may not have an agreement with the merchant's acquiring service provider. Cryptocurrency payment company BitPay issues cryptocurrency cards for its customers. However, some of them face difficulties when trying to pay for goods and services.. One of the users complained that his card with a balance of more than $1,000 was not accepted at the restaurant, and he had been waiting for a response from BitPay support for more than three hours at the time of writing the review. A similar problem sometimes occurs when shopping online.. One of the users of the Binance VISA card did a great review on this topic. Users of crypto-currency cards should remember that sometimes there are problems with payment both in offline outlets and when shopping online.. You should not completely rely on a cryptocurrency card yet and you need to have fallback options for urgent payments. High and Unexpected Fees Despite promises of no hidden fees or restrictions, users of crypto-currency cards are often faced with a high total cost of service. There are several ways to charge additional fees to users: Unfair exchange rate. Cryptocurrency card issuers often earn income from crypto-to-fiat exchange fees and exchange rate differences.. Sometimes a bad exchange rate becomes the main reason for closing a cryptocurrency card. Monthly maintenance fee. Almost all cryptocurrency card issuers charge a service fee. Average monthly fee – about $2. However, companies may offer cards with different limits, and users will pay more for cards with higher limits. Transaction fees. Most issuers charge a small percentage or flat rate per transaction. Some Bitpay card users complain about extremely high fees (around 20%) for some transactions. Other fees. High exchange fees, money back fees, card inactivity fees The British company Revolut, in addition to traditional financial services, allows customers to buy and send cryptocurrencies among themselves, and issues crypto-currency cards for European users. However, crypto cannot be sent to the Revolut wallet directly from an external crypto wallet – the user must first send fiat from a bank account to their Revolut card. Only after that the user can buy cryptocurrency and send it to other Revolut clients. To withdraw money, users must again sell cryptocurrency for fiat. Some Revolut users complain about high exchange fees: “Recent changes to the app have made the interface uncomfortable for the user. For example, it is difficult to find out the exchange rate. Charts are inaccurate. Cryptocurrency exchange fees are too high. After paying extra for a premium account, the commissions remained the same, although the company promised the opposite … “. Some cryptocurrency card users must also be prepared to pay a fee if they wish to receive a refund.. Bitnovo offers two types of cards for residents of the European Union: Bitcard debit card and BITSA prepaid card. Although all information about options, restrictions and fees is described on the company's homepage, some users warn about the fee for any return or cancellation of an order: “Awfully long process. I reached the end of the order after payment and found that I could not complete it. Waiting for a cancellation and they [Bitnovo] tell me that I have to pay an “administration fee” of 10 euros to cancel my order. Absurd, scam.” Some cryptocurrency service providers charge fees for account inactivity. Card issuers sometimes charge this fee in cryptocurrencies, usually in BTC.. Considering the volatility and cost of BTC transactions, the fees can be huge. Travel Bitcoin Debit Card users from Coinsbank often write about charging fees for card inactivity. Users are informed by e-mail that if they do not use the account for more than twelve months, the company will charge a monthly special commission of 49.95 euros. Coinsbank was one of the first companies whose Visa crypto cards were frozen in 2018.. At first, the company promised to provide customers with the ability to withdraw money through Western Union, and also stated that it would soon issue new cryptocurrency cards.. However, over the past almost three years, no new cards have been issued, and withdrawing money from a Coinsbank account to external cryptocurrency wallets implies a high commission. Old Coinsbank cardholders often stopped using their accounts for long periods of time, waiting for a better exchange rate, a new cryptocurrency card, or another way to withdraw their money.. As a result, they faced a commission for account inactivity. Wirex, a digital payment platform that offers cryptocurrency cards with support for multiple cryptocurrencies and fiat currencies, charges a similar fee. But in the terms of service it is called “storage fee”. This fee may apply to accounts with no transactions for 9-18 months and is £5/USD/Euro per month on fiat balances. If the account is inactive for more than 18 months, the storage fee is 0.003 BTC. Similar fees are being charged to users and other crypto businesses – the number of platforms adding such fees is on the rise. Users of crypto-currency cards should remember that these companies make a profit from every transaction that the user makes and are not interested in working as a long-term depository. Card or account blocking Some cryptocurrency card holders complain about unexpected card or account blocking without explanation. Former users of Wirex cryptocurrency cards report that even after years of using the card, they received a short email stating that the client had 24 hours to withdraw all their money before the account was blocked.. When asked about the reasons for blocking, users received the following response: “Due to the requirements of the current legislation, we cannot specify the reason for closing your account.” Any failure in the system, any warnings about suspicious behavior, even if the client can fully explain it and provide the necessary confirmations, may lead to an unexpected closure of the account. The Bitwala client is reporting the same issue. After blocking, clients are faced with the inability to withdraw money from the account. Accounts are frozen instantly, and there is no time to withdraw money or send it to an external wallet. Users from several companies, including BitPay and Wirex, have described this situation. In addition, in March 2021, Wirex froze all previously issued Visa cards and switched to MasterCard.. Many users emphasize that this was an unexpected move.. What's more, customers report that they now have more problems communicating with customer support. Reasons for blocking No cryptocurrency card issuer clearly and openly explains how customers can avoid the above problems, whether it is account blocking or problems with passing KYC. Each cryptocurrency company provides a user agreement and its terms. However, when opening an account and applying for a cryptocurrency card, users do not read the agreement carefully enough and accidentally violate its terms.. According to Bitpay's terms of service: “We reserve the right, in our sole discretion, to restrict your use of the card, including to restrict or prohibit certain types of transactions. We may refuse to issue a card, revoke card privileges, or cancel your card with or without cause, except to the extent permitted by applicable law.” Automatic algorithms check all transactions and accounts and warn if a suspicious action from the list above has been committed. As a rule, these warnings must then be checked by company employees and the security service.