It has been a while since the inception of Bitcoin and all things Crypto has taken over our financial worlds. And credit card companies are finally ready to get on board the Crypto train. About time, lads. About time!
One way they’re doing it and which is a remarkable effort on their side is by offering their customers personal loans in the form of Crypto. I know. It sounds weird, right? I’m trying to wrap my head around that one as well.
But hey, if they’re offering personal Crypto loans … if not, then why not? And it does seem there are some very good reasons to do so!
Crypto Personal Loans Offer Lower Interest Rates & Improved Credit Scores
Most personal loans are repaid in monthly installments over a set period of time, and they typically have fixed interest rates. Crypto personal loans work in the same way, but instead of using fiat currency, they use cryptocurrency as collateral.
Crypto-backed loans use your crypto assets as collateral, so they tend to have lower interest rates than traditional personal loans. Plus, crypto-backed loans can also help you access liquidity without selling your crypto assets.
And because crypto-backed loans are reported to the credit bureaus, making your payments on time can help boost your credit score. So if you want to use personal loans to build credit – either traditional or crypto-backed – is a great option to consider.
So far, only a handful of companies are offering crypto personal loans, but that is sure to change in the months and years ahead. In the following article, we’ll talk about how some credit card companies are incorporating crypto into their overall business strategy.
Merchants Gradually Accepting Crypto
In 2019, Visa put together a full-time crypto product team, a move that was unprecedented. They did so because the crypto market was expanding rapidly. Like other competing card companies, Visa knew that crypto-based exchanges and digital wallets had captured the public’s interest.
Visa and other companies, such as Mastercard, saw investors moving billions of dollars through crypto wallets and exchanges. It made sense that they would want to take advantage of that. The main challenge was that few merchants were directly accepting cryptocurrency as payment for goods or services yet.
Part of what makes credit card companies so successful is that nearly all merchants accept them. When you have a disruptive new technology, like crypto, it’s not so easy to get most merchants to take the necessary leap of faith to start accommodating it.
That’s because credit cards still use the US dollar as their exchange medium. US dollars are connected to and associated with the American government. By contrast, cryptocurrencies are destabilized. That’s why some merchants remain wary about exchanging goods and services for them.
Cryptocurrency Pre-Paid Debit Cards Instantly Convert To Fiat
It has been a few years since Visa, Mastercard, and other credit card companies started probing the crypto market and considering ways to incorporate these new currency forms as payment. Since then, crypto usage has only increased.
Accordingly, Visa and similar companies sped up their research and development related to crypto and came out with some new products. For instance, Visa designed and promoted a prepaid debit card where a user could store cryptocurrency. If the consumer tapped the card to pay for something at a terminal, the crypto wallet would instantly convert that crypto to fiat. Fiat refers to currency not backed by a particular commodity, like silver or gold.
Purchase Crypto Assets With Your Credit Card
Mastercard made a splash by announcing that they would start supporting certain crypto forms directly on their network. For the first time, they would allow people to use their credit cards to purchase crypto assets.
Credit cards set up to allow crypto transactions seem to be the preferred way card companies are incorporating this new technology to meet rising demand. Visa, Mastercard, and others have come out with prepaid cards attached to wallets that are compatible and loaded with certain popular cryptocurrencies.
If you get one of these cards, you can use it anywhere Visa, Mastercard, or similar card companies are accepted. For example, if you want to purchase a cup of coffee and use your prepaid Visa card that has crypto on it, you would tap the card to pay. Instantly, the crypto on the card would be converted to fiat currency, such as the US dollar.
Credit Card Companies Use Popular Cryptocurrencies
With these transactions, since you’re converting crypto into fiat currency on the fly, card companies are only using more widely accepted currencies on their networks directly. This seems to be an ideal way to combine the two technologies.
If crypto interests you and you want to start using it to pay for things, this is likely the most logical way to do it right now. It also seems likely that additional tools that blend recognized credit card uses with crypto are on the horizon.