In July, major crypto lender BlockFi officially launched its credit card that lets customers earn cryptocurrency rewards based on spending. Today, the company said the number of BlockFi cardholders has grown to over 50,000 in the last three months.
Unlike cryptocurrency debit cards offered by companies like BitPay and Coinbase – which let customers spend their crypto – the BlockFi credit card incentivizes users to spend U.S. dollars in order to earn crypto.
BlockFi first announced its partnership with Visa to issue a bitcoin-back rewards credit card in December 2020. Instead of the cash back or frequent-flier rewards typically offered by credit cards, BlockFi’s card pays holders 1.5% BTC (BTC-USD) on all purchases.
Based on the most recent financial statements from American Express, Mastercard and Visa, the average U.S. credit card user of these three major issuers spends about $20,000 per year. By comparison, for its three months of data, BlockFi cardholders are on track to spend an average $30,000 per year or 50% higher than major issuers. Based on the same spending projections by the company, BlockFi cardholders are expected to spend annually over $2 billion.
BlockFi’s report also states that Costco, Amazon and Home Depot are the merchants where cardholders spend the most but, notably, during the first month BlockFi issued the card Compass Mining, the retail-friendly bitcoin mining company, was in the list of top 10 vendors based on volume spend.
“Our typical cardholder is a younger and savvy investor that has successfully grown their wealth,” BlockFi CEO Zack Prince told Yahoo Finance. “They generally believe in the power of bitcoin and see access to the BlockFi Rewards Card as a valuable venue to earn passive income and solidify their financial health.”
Since announcing its credit card at the end of last year and launching it this summer, several other companies have heightened the competition by issuing their own variation of crypto-back rewards card: Venmo, SoFi, Brex (a partnership between cryptocurrency exchange Gemini and Mastercard), a partnership between fintech company Upgrade and NYDIG, and the forthcoming Unfimoney credit card with Visa.
Each crypto-back credit card gives a different spin on rewards. Gemini offers tiers of 3% back on dining, 2% on groceries and 1% on all other purchases, and pays rewards in BTC as well as 30 other cryptocurrencies. Upgrade offers 1.5% back in BTC but customers won’t receive rewards until they pay off their existing credit card purchases.
BlockFi launched its bitcoin credit card with Visa on July 6, when bitcoin’s price was around $34,000. Since then its run an advertising campaign with both online and physical billboards as well as a series of commercials (1,2,3).
The company gave its cardholders 3.5% in bitcoin rewards for their first 90 days as a sign-up bonus. Thanks to bitcoin’s rise since then cardholders effectively earned over 4% of their spending in BTC with a sign-up bonus, or 1.8% without the signup bonus.
In the past, timing crypto investments to a rising bitcoin price has turned out badly for retail investors, according to a report from consumer spending data provider Cardify. It showed that crypto investment deposits by retail investors lagged the rising bitcoin price rise in May before spiking just as the price collapsed at the end of the month. Earning bitcoin or other crypto rewards on spending might offer the same investors a relatively safer on-ramp into the crypto markets.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.