I was so excited when BlockFi announced the first-of-its-kind Bitcoin rewards credit card,
and jumped at the chance to get one when it was released.
Today, I’m a little over one month into owning this card, and I’ve already concluded
that getting it was a huge mistake.
The allure of earning Bitcoin passively with every purchase is appealing, but that doesn’t
stop the BlockFi Bitcoin rewards from falling short on just about every level.
So in this video, I’m sharing my disappointment with the BlockFi Bitcoin rewards credit card
and why you might want to avoid this card.
We’ll start with revisiting the card’s features and rewards, because that’s ultimately
where this card falls short for me.
Unfortunately, I didn’t fully consider how these rewards measure up until I already had
the card.
Therefore, I’m missing out on the countless superior credit cards out there while I use
this card, which is where my regret comes in.
I’ve realized that Bitcoin rewards are kind of overrated, and they’re made even worse
with the shady system BlockFi uses to deliver your Bitcoin rewards.
Luckily, the solution is simple - just finding better credit cards.
So we’ll wrap up with what I’m looking to do next within my portfolio of credit cards
to get back on track.
I’ll also touch on a better way to get passive crypto income, which actually comes with $50
of free Bitcoin, so be sure to stick around.
You might already be familiar with the BlockFi rewards, but I have to outline them again
to paint a full picture here.
For starters, BlockFi is a no annual fee credit card, so it won’t cost you anything to open
and maintain - nothing unusual here.
The main feature is that you will get 1.5% back on every purchase in the form of Bitcoin.
This is the selling feature, because it is the first card that actually pays out rewards
in Bitcoin, and of course, that’s why I was so interested.
My thinking was that 1.5% back in Bitcoin would eventually be worth more than 1.5% cash
back with a normal credit card.
And as far as cashback rewards go, 1.5% is fairly average, as most cards offer at least
1% while many offer 2% or higher.
For the first 90 days of card ownership, you actually receive 3.5% back on your purchases,
but this is capped at $100.
This means you need to spend roughly $2,850 in the first three months for a $100 bonus.
Anything over that will produce the standard 1.5% Bitcoin rewards rate.
If you manage to spend over $50,000 a year, any spend over that limit will give you 2%
Bitcoin back.
But honestly if you’ve got that much annual credit card spend, there’s probably so many
better options out there for you.
In addition to these rewards, the BlockFi credit card also offers some rewards within
its crypto trading and savings account platform.
You’ll get .25% back on every trade, up to $500 per month.
As I covered in a previous video, BlockFi is super expensive to trade on, and taking
advantage of this offer doesn’t really make up for it.
The other benefit is you get an increased $30 referral bonus when you get people to
sign up on their platform, which is kinda nice, but I personally would not recommend
BlockFi so that’s not something I plan to take advantage of either.
Finally, they used to offer increased interest rates on stablecoins when you have the BlockFi
credit card, but I can’t find details on this anymore so they might’ve nixed that
offer.
I think it boosted rates about 2% or something, which still didn’t bring the interest rates
up to what you could get on other platforms.
So ultimately, all of the BlockFi ecosystem benefits are kind of worthless.
Yet somehow, I was still infatuated with the potential for Bitcoin rewards, and signed
up for the card.
After revisiting the numbers, I realized this was a very poor decision because of how small
the rewards actually are.
As I just said, I wasn’t interested in any of the BlockFi platform benefits that the
card comes with.
So all I expected to get out of this card was the unlimited 1.5% back in Bitcoin, and
the 3.5% rate for the first 90 days.
But when you compare this to other credit cards on the market, the BlockFi card doesn’t
stack up.
The 3.5% back promotional rate is essentially a $100 sign-up bonus for getting the card
and spending $3,000 in the first three months.
This is a pretty standard format for credit card rewards.
However, most other credit cards offer more cash for less spending in this sign-up period.
On average, you’ll find credit cards that offer 200 to $300 when you spend something
like $1,000 or less within the first three months.
So comparing the two, BlockFi gives you way less and requires that you spend way more.
Furthermore, other credit cards offer this sign-up bonus ON TOP of whatever cash back
rewards they have.
So you may get that 200 or $300, AND 1 or 2% back on your spending during that period.
With BlockFi, your sign-up bonus replaces your rewards rate, which makes spending in
the first three months less valuable than it would be with another card.
Overall, this makes for a pretty weak sign up bonus, with the exception that your paid
in Bitcoin instead of cash.
And that leaves the unlimited 1.5% back in Bitcoin.
Again, when we compare this to other cards, that’s not very exciting.
There are several credit cards out there that offer an unlimited 2% back, and others that
offer up to 5% back on flexible categories.
Even if we just consider the 2% cash back cards, an offer like that will give you 33%
MORE rewards, which is a massive difference.
The only differentiator with BlockFi is that you get paid in Bitcoin, instead of cash.
So across the board, BlockFi offers much lower rewards than other credit cards on the market.
As I mistakenly believed, you may think that getting paid in Bitcoin instead of cashback
makes up for this difference.
But let me tell you why Bitcoin rewards are actually overrated and worth less than you
think.
This shouldn’t be a total shock, but it just comes down to the dollar value of your
rewards.
The problem is that if you just stuck with a cash back rewards card, and used that cash
to buy Bitcoin immediately, you would have more Bitcoin than you would if you earned
1.5% back in Bitcoin.
Let’s play out this comparison a little further.
Let’s say you spend $100 on two different cards.
One is the BlockFi rewards credit card, with 1.5% Bitcoin back.
The other is a standard 2% cash back credit card.
With BlockFi, you’ll earn $1.50 in Bitcoin.
With the standard credit card, you’ll earn $2 in cash.
Now as someone who believes in Bitcoin long-term, I told myself that those Bitcoin rewards will
appreciate so fast that I’d rather have them than a cash back reward.
But if you think about it practically, that’s probably not going to be the case from month-to-month.
So if both rewards drop into my account at the end of a monthly billing cycle, the BlockFi
card still gives me $1.50 of Bitcoin.
On the other hand, I can take my $2 cashback on the other card and go purchase $2 of Bitcoin,
effectively earning more Bitcoin from my credit card without earning rewards directly in Bitcoin.
And yes, I realize there are some asterisks with the cashback method.
You have to consider trading fees and transfer fees.
But, as I outlined in my previous video on crypto interest platforms, these can be minimized.
I trade on Gemini with a maximum of a .35% trading fee, where I can then withdraw to
an external wallet at no cost whatsoever.
So yes, you might lose a small percentage on fees, but that’s still effectively 1.99%
Bitcoin back using a standard credit card, compared to BlockFi’s 1.5%.
Another caveat is most cards’ rewards can only be applied to your bill, so you would
just spend less cash out of your bank account to pay your bill and put that money in Bitcoin,
or any other cryptocurrency, instead.
And yes, there are some months where Bitcoin surges 30% or more and it would be nice to
have Bitcoin rewards piling up during that time.
However, BlockFi has a sneaky rewards system that eliminates credit card holders from benefiting
from monthly price movements.
I noticed that each time I make a purchase and pay my BlockFi credit bill, I receive
points, which are not tied to Bitcoin satoshi.
Instead, each point represents 1 cent, where I’m getting 1.5 points for each dollar I
spend.
According to the BlockFi website, these points are converted into an equivalent dollar value
of Bitcoin on the redemption date.
Let me unpack this further, because this is super important!
There’s a difference here between getting Bitcoin back, and getting points back that
are redeemed for Bitcoin later.
If I spent $100 and received 1.5% back in Bitcoin, I would receive about 3,000 Satoshi
at today’s prices.
This way, if Bitcoin’s value increased throughout the billing period, I’ve already secured
my rewards in Bitcoin, and they would appreciate, too.
So for example, if Bitcoin increased 50% that month, my $1.50 of rewards in Satoshi would
now be worth $2.25.
However, this isn’t how BlockFi bitcoin rewards work.
Because you receive points, instead of automatic Bitcoin back, your rewards aren’t fixed
to Bitcoin satoshi until they are redeemed.
Until then, they maintain a dollar value, which is converted at the end of the billing
cycle.
So in the same example, if I get 1.5% back on $100, I receive 150 rewards points.
These may be worth 3,000 satoshi today, but that can change because they are not redeemed
yet.
If, at the end of the billing cycle, Bitcoin has appreciated that same 50%, my Bitcoin
rewards points will still be tied to dollars, and therefore worth less.
Specifically, they’d be worth about 2,000 satoshi.
This is an extreme example, but it shows how BlockFi has set up their rewards system to
delay actually paying you in Bitcoin.
They also do the same thing with your $100 in Bitcoin sign-up bonus, which will be delayed
4 months before it hits your account, and we all know how much Bitcoin can move during
a four-month period.
Considering my whole motivation for getting this card was to accumulate Bitcoin, this
is not a good enough system for me.
BlockFi eliminates any potential advantage to earning Bitcoin back throughout the month,
as your rewards are just converted from dollars into Bitcoin at the end of the cycle.
And as I touched on earlier, this is the exact same thing you could do with any other rewards
credit card, while also getting higher rewards rates.
When you look at the big picture, BlockFi offers inferior rewards rates with Bitcoin
rewards designed in their favor.
I’ve realized that if I want to earn Bitcoin with credit card rewards, the fastest way
to do that is to maximize my credit card cash back rewards elsewhere, then just spend those
savings on Bitcoin.
To do this, I’m honing in on the credit cards that offer the highest cash back rewards
for areas where I spend the most.
I previously talked about the Discover It cash back card, which earned me over $600
in rewards during my first year.
I would highly recommend this card to anybody, because you can get up to 10% cash back during
your first year, which I haven’t seen anywhere else.
Since I’ve completed my first year with this card, though, I have to find other options
to maximize my cash back.
I’m currently thinking about the Citi Custom Cash card, which offers 5% on your highest-spending
category each month, on up to $500.
I’m thinking this could be perfect for maximizing cash back on my grocery spending or restaurant
spending, which are really the areas I could benefit the most from more cashback.
Plus, it offers a $200 sign-up bonus, which again makes BlockFi look pretty weak.
I’m hoping that I can balance my Discover It card and the Citi Custom Cash card to maximize
my cashback throughout the year.
However, M1 Finance recently announced an interesting credit card that I’ll also be
looking into.
They’re offering up to 10% cash back when you spend at businesses that you also invest
in.
I think this is a really cool idea, and since I already love investing with M1 finance,
it’s probably something I’ll try out.
Given that you have to invest in the stocks to get the rewards, this may not be for everybody,
but I’m going to cover it here soon and I think it’s going to be a really fun dive
into the combination of investing and credit card rewards.
But between all these other cards, I will earn so much more cash back than I could get
in Bitcoin back from BlockFi.
I am going to continue spending to make sure I at least get the full 3.5% back promotional
offer, but after that, my BlockFi card is going in the junk drawer and probably never
coming back out.
The last thing I want to touch on is where else to get passive income with crypto, because
BlockFi credit rewards clearly aren’t cutting it.
I did a video a few weeks back comparing most of the big crypto savings accounts.
When you deposit crypto into these accounts, they’ll use that balance to make loans to
other customers, paying you weekly or monthly interest in return.
There are a lot of things you should consider before doing this, so definitely check out
that video if you want to learn more.
But, I concluded that the Celsius Network was my favorite platform for crypto interest,
where you can earn 6.2% interest on Bitcoin just for holding it on the platform.
Feel free to refer to that video or dive deeper on your own, but if you decide to try it out,
you can use the link in the description to get $50 in free Bitcoin with a $400 deposit.
That’ll do it for today’s video, but I’d love to hear from you guys if you have any
credit card recommendations.
I’d definitely appreciate any suggestions you have, and I’m sure others will too.
Thanks for watching and I’ll see you next week.