How Cryptocurrency-Linked Cards Like MCO Visa Card Works

No ATM withdrawal fees, no foreign currency transaction fees, attractive interbank forex rates, free lounge access are some of the benefits touted by charge cards like MCO Visa card and TenX card. These are not regular credit cards but they are cryptocurrency-linked cards. Whether you've got no knowledge of cryptocurrencies or else you are deep in the cryptocurrency game, such cards shouldn't be treated as regular credit cards or an atm card because they do expose you to the inherent perils of cryptocurrencies. Here's a help guide to understanding cryptocurrency-linked cards and the risks of with them.

This article presumes that you have some knowledge about cryptocurrencies, so read our primer to cryptos for any quick refresher.

What Are Cryptocurrency-Linked Cards?

Cards like MCO and TenX are associated with cryptocurrencies because they confer the cardholder to either 1) the ease of spending their cryptocurrencies as quickly as normal fiat currencies (e.g. Singapore dollar or US dollar), 2) incorporate some form of accrual of cryptocurrencies by using the credit card or 3) involve holding or 'staking' cryptocurrencies to gain access to the greater reward tiers.

The TenX card functions as a debit card and allows cardholders to spend three popular cryptocurrencies (bitcoin, ether and litecoin) directly inside a credit/debit card transaction by automatically converting the cryptocurrency to fiat currency via the Visa network. Consider cryptocurrency as the second forex; much like the best way to spend in Japanese yen when you are in Japan but pay your bill in Singapore dollar, the different options are in fiat currency (e.g. U.S. dollar) while you pay in cryptocurrency.

Unlike TenX, the MCO card does not allow the cardholder to load cryptocurrencies onto the card: all cryptocurrencies are first converted to U.S. dollars and then from U.S. dollars to the currency spent in. Instead, the MCO card involves both cashback and staking.

Firstly, spending with the MCO card accrues 1% cashback by means of their cryptocurrency, the CRO token. This means that the value of your eventual cashback reward depends upon the price performance of the CRO token and may not be what you expect so that it is.

Secondly, to unlock the greater reward tiers including free lounge access and free Spotify/ Netflix/ Amazon Prime subscriptions, you would have to 'stake' CRO tokens. Which means that you need to hold a fixed quantity of CRO tokens in the company's e-wallet for six months. Past that initial period of staking, you would need to continue holding CRO to savor the maximum rewards benefits.

You Experience Cryptocurrency Risks

Your contact with cryptocurrencies may be minimal or larger than expected, depending on the card you choose and just how you use it. For instance, if you work with the lowest tier from the MCO card, you would simply be subjected to cryptocurrency through the value of your cashback tokens which is likely a little amount. However, if you are 'staking' or holding cryptocurrencies to spend, you're more subjected to the chance of cryptocurrencies.

The price volatility of cryptocurrencies can be extreme. Price spikes and crashes of above 100% aren't uncommon. The unregulated nature of cryptocurrencies also means that there is no imposed limit on the price movement. It's possible for any cryptocurrency to lose its value overnight or be turn off or delisted from an exchange because of regulatory compliance. Additionally, fraud and security risks cannot be understated. Even well-established names like Wirecard, that was a significant cryptocurrency card issuer, can find themselves in insolvency, while well-known cryptocurrency exchanges like Mt Gox and Bitfinex have been hacked.

This means that potentially you could lose the value of the cryptocurrencies you're staking or holding. For example, you use $1000 to buy and stake CRO to obtain the higher rewards tier. However, CRO tokens suffer a cost crash of 50% due to an alleged hacking attack around the company's crypto-wallet. You would immediately suffer a loss of revenue of $500 in the worth of your CRO tokens.

You Can Enjoy Similar Rewards With no Cryptocurrency Risks

By utilizing a cryptocurrency-linked card, you're opening yourself up to additional risks, particularly if you don't have a strong knowledge about cryptocurrencies.

If you're purely interested in the rewards aspect of cards like MCO, there are lots of alternatives that you could consider such airmiles or cashback charge cards. These can give the same rewards including lounge access and cashback with no downside perils of cryptocurrency exposure.

If it's foreign exchange capabilities that attract you, you can consider Multi-Currency Accounts (MCAs) for example DBS MCA or UOB Mighty FX, or multi-currency mobile wallets like YouTrip or perhaps a multi-currency card like Revolut.

In general, you should be well-versed in the risks and rewards of holding cryptocurrencies prior to applying for a cryptocurrency-linked credit card. Otherwise, you might be better off trying to get the tried and tested gamut of airmiles or cashback credit cards or multi-currency accounts and cards.