Hey guys, I have been using Coinbase’s debit card everyday for about 2 weeks and prior to getting it, I tried to do some extensive research on what are the advantages of using this card. Hopefully this review can give a better insight to incoming users. Here are my thoughts.
**Coinbase Debit card overview**: Coinbase Card is a Visa® debit card that lets you spend any asset in your Coinbase portfolio and earn rewards for each purchase. There are no annual fees and you can receive up to 4% cashback for your spending.
You can choose which cryptocurrency for your cashback reward. % return depends on which coin you elect **[As of 09/01/2021]**.
1. XLM 4% CB
2. GRT 4% CB
3. BTC 1% CB
4. ETH 1% CB
5. DOGE 1% DB
Note that any CB received through this program are all treated as taxable capital gain events. Therefore if you receive CB and sell your coin immediately, you will owe Big Brother some money… Assuming majority of users cash out with short-term capital gains, I would recommend you to treat the CB % rate for coins 40% less than the awarded rate due to taxes (XLM = 2.4%)
Because of the tax implication for crypto capital gains, its hard to say if the cashback rates are even worth it. Even if you were to HODL the coins for long term tax, the returns aren’t that much better than a regular credit card. I will talk more about this later below.
***Activating the Card***: Once you enroll, they said it will take 1-2 weeks for the card to be delivered to your home. I got it around 4 days. Between those 4 days, I was allowed to still spend with the card digitally. What I noticed once I received the physical card was that the 16 digit number, CVV, and EXP date were all different from my digital card. Figured this is why I couldn’t activate my card with the numbers on my digital card. The app asks you to activate your card and you cannot activate it with your digital card numbers. It has to be activated with your physical card.
***Coinbase Debit Card***: Absolutely garbage. I would have hoped that the quality of this card would be similar to a regular credit/debit card, but its beyond worse. In the mail you receive a big blue envelope and if you try to get a feel of your card through the envelope, it feels like one of those fake free credit cards that institutions give you where its just a paper card and says “Enroll Now!” If you ever had experience purchasing pre-paid cards from a convenience store and felt like that card was made out of paper, this is Coinbase’s debit card.
***How to Spend***There are two methods on how Coinbase allows your to spend your card. Note that you need to have the money in the regular Coinbase app and not Coinbase Pro. If you have funds in the Pro version, you can simply move them to the regular app without any fees.
**Funds from USDC coins:** You will incur no fee if you spend using your USDC coins. $1 USDC = $1 USD. You must first purchase USDC coins. Link your bank account, purchase your USDC coin, there are absolutely no fees for buying USDC as well as no fees for spending USDC. Basically you’re doing a currency exchange with no fee and the rate is 1:1.
**Funds from other coins:** If you do not have any USDC coins and use their debit card for purchase, they will liquidate any other coins that you have available in your account. This will incur a 2.49% fee charge. So make sure that you have enough USDC in your account before making any purchases. If you have other cryptocurrency and cannot purchase USDC, I would highly recommend that you convert your coin to USDC. From what I believe, converting your coins to USDC also has a fee but it isn’t as much as their 2.49% liquidation fee.
**Spending:** I used this card at Starbucks, Target, Gas, Grocery Stores, and tried ATM withdrawal (Don’t recommend). Overall, its pretty standard to your regular card usage. For ATM withdrawal, Coinbase won’t charge any fees on the withdrawal, but the machine will. I have a conventional debit card that reimburses any ATM fees so seeing Coinbase not do that sucks…
Digital purchases is kind of a nuisance. Recently they allowed Coinbase card purchase through Apple/Google pay, but trying to purchase digitally is pretty hard and sending money to friends and family is impossible. A lot of times my card gets declined for any digital transaction.
Some of you might have had an idea of performing an arbitrage on receiving unlimited CB… You probably thought that you can use a payment service site like Venmo, Paypal, Zelle, etc. to send money to your friend/yourself, return the money back to your Bank, re-fund your Coinbase USD, gain cashback, rinse and repeat. Well don’t… it doesn’t work. Coinbase also pointed out that their cards cannot be used in those apps on their FAQ page. [https://help.coinbase.com/en/coinbase/trading-and-funding/coinbase-card/coinbase-card-for-the-us](https://help.coinbase.com/en/coinbase/trading-and-funding/coinbase-card/coinbase-card-for-the-us)
Venmo: They allow you to add your card into your profile, but it will always decline your transaction.
Paypal: Haven’t used it yet, but I’m pretty sure it’s the same as Venmo since they are both the same company.
Zelle: This one was interesting… when you try to add your card, the app reads your card number as a pre-paid card which they do not accept. Hence why the quality of Coinbase card is so poor.
Since Coinbase card is a debit, does it come with an Account # and Routing #? Unfortunately no. This sucks for people who thought of possibly paying their rent/bills/etc with this card. Typically people cannot pay their bills, rent, CC debt without a Bank routing/account #. It is still possible to pay with your Coinbase debit card, but you usually have to make the payment through a 3rd party site like Plastiq or Yardi. Doing this will rake you a minimum 2.5% fee. With the maximum CB of 4% through XLM or GRT, your return is only 1.5% CB. Add in the capital tax implication and you’re looking at roughly **0.6%** CB net reward…
Overall, I think with the innovated hype of how people can now purchase regular things with crypto was overdone. Its nice to see that Coinbase and other exchanges are allowing regular day to day purchases completed through crypto, but I think I am going to go back to credit card spending…
Coinbase CB rate pretty much is the same as a regular credit card after all considerations. The card also has so many restrictions that you shouldn’t be surprised that your transactions might be declined a lot. Not only is the CB return rate similar to a regular credit card, but you can only spend what you have deposited whereas credit card allows credit “borrowing.” Lastly, the card exposes you to possible liquidation from your long term HODL coins plus additional fees which in my honest opinion is a huge L for consumers.
Hope this helps. Let me know if you have any questions.
tl:dr – /r/pukem0n: Probably not worth it, maybe even worse than normal credit cards
/r/UnsolvedVoid: For EU/UK please make sure you read the agreement and fees, as not even close to US ones.
EDIT: Someone pointed out something interesting. If a consumer spends with their Coinbase debit, but didnt have USDC and got liquidated from their alt coins, wouldnt there be possibly a 2.49% Fee + Capital Gains tax?
Im not a tax professional but I presume you would have to pay more in the given situation. If the alt coin that was liquidated were a long term hold and has huge capital gains, there probably will be some tax implications. (Any CPA can confirm this?)