My Bitcoin Debit Card Experiment

[eroche]

To save some Bitcoins each month
Copay is a great app and has let me separate my "holiday fund", my "Christmas fund" and my "car tax fund".
This is post 2 in a 2 part post. Part one is available at Do you use a bitcoin Debit card?

My car tax is now almost due and I have saved 50 Euro a month for the last 12 months. I have more than the 600 Euro I needed stored in a separate wallet on my copay app called "car tax". This is really cool. My wife can even see the funds on her phone and she is getting excited about bitcoin too (I think).
This part of the experiment was a great idea and worked really well.

Now all I need is to convert to fiat and make the payment over the phone.
As the price remained relatively stable over the last few months it gave me time to consider the pros and cons of using Bitcoin Debit Cards for making the final payment at the end of the year.

Xapo

This is a great app and it provides a card linked to the app. When you use the card at a POS or ATM it converts bitcoins directly at a spot exchange rate from your app. The retailer doesn’t even know it's converting bitcoin under the hood. The worry for me with this card for online or insecure purchases is that the card links directly to your app. In theory if someone stole your card it could take out all the coins you have stored in your app. Xapo claims to have insurance for your funds but it's not clear to me how much would be covered or how easy it would be to recover if you were robbed. But there must be a limit! There are safety features in the app. For example you get a text notification when a purchase is made with the card. There is also a vault feature where you can store money that is more secure and not linked directly to your card but there is a time delay to get money out of this into your “current” account.

Wirex

This also is a great app. This works different than Xapo. If you get a debit card it doesn’t link directly to your bitcoin account, Instead the app has different currency cards which you can top up in the app as you need. These currency cards are linked to your debit card. This seemed perfect for my purposes. When you want to pay the car tax you could top up a card quickly in app and then just use your card over the phone. It wouldn't matter if your card was stolen as there would be no money in your account for robbers to use. It would be safe on your bitcoin account which was not linked to the debit card directly. The bitcoins are converted to fiat when you top up each card. If you transferred too much you would need to transfer back to the bitcoin card (but this incurrs a cost).

Shake

Shake offers similar features to Wirex. This card is in beta so I am not going to say much about it. It's still developing and it looks promising. You can get cards in the app with different currencies which you need to top up before you use. It's kind of similar to Wirex in that sense, the difference is you don’t have a linked bitcoin account in the app. But you could just transfer when you needed from another wallet to Shake so in a way the way you top it up is very similar.

All three apps would in theory work for making my car tax payment of 600 euro. In recent months I have used them at POS devices and online and have not had any issues for other purchases. The retailers didn’t even know bitcoins were behind the transaction.

What are the costs I will incur using these cards?
A quick check of the websites show that if I pay in Euros (the same currency as my card) I will not incur any fees. Great but each method involves at some stage converting bitcoin to fiat. There will be a cost for that.
Lets compare the difference between Wirex and using the Bitstamp exchange for illustration purposes.

• To sell bitcoins for Dollars on Bitstamp I would get $650 for 1 bitcoin.
• To transfer 1 bitcoin to my Wirex Dollar card I would get $629.
  I am assuming the conversion to Euro would happen with at a similar difference in rates. This means there would be a 3% FX difference for my Euro payment which equates to a 18 Euro difference between using the Bitstamp exchange or using the Wirex card.
  Its harder to compare Xapo and Shake but they also incur a difference in spot rates of about 2-3% when you use your debit card in Xapos case or top up you Euro card in Shakes case.

To Debit or not to Debit?

In conclusion it costs a lot to use your Bitcoins to make purchases with Bitcoin Debit cards compared to using exchanges. I will be sticking with traditional banking for now.

Some interesting alternatives to traditional finance worth mentioning.

Revolut

This is not a bitcoin card but great for foreign transactions and supports tap and pay and advanced security features.

Plutus

This will be a debit card on your smart phone. Its not out yet but watch this space.

Comments

[brains]

A very good read. It would be nice to have a more in depth view of several cards that are out there. It would be especially nice to know more about the fees and exchange rates, which is where they have an opportunity to take advantage of people.
I met the owner / founder of xapo at one of the first bitcoin meetings when it was around ten dollars per, and he was worse than a used car salesman, not a nice person. I have been waiting for a card that could be used internationally, but I will not give my business to xapo unless it is bought out by someone reputable.

[jahtech]

Another good read thanks i will check them out

[eroche]

Thanks @jahtech. Bitcoin debit cards are a novelty for most I think. They do provide a way for people to spend their coins without using traditional banks but at a cost.

[natek]

Great Summary, haven't seen these before.

[pepe7777]

I was considering getting bitcoin debit card, but most of them had some sort of monthly maintenance fee and that put me off, as I only intended it to be an alternative, emergency fund, in case my bank account was frozen etc.
What I did eventually, was to open a free bank account with (officially bitcoin friendly) Fidor bank, applied for a free debit mastercard (no fees on transactions) and linked the card with Circle app (to sell or buy BTC).
It's not perfect, as it takes few days for the money to be credited to the card (when selling BTC), but it's absolutely free.

[eroche]

Hi @pepe7777. Interested to hear about you're experience with circle. What kind of rate does it give when you convert from fiat to bitcoin?

[pepe7777]

Hi. From my experience the rate is always slightly better than the Coindesk rate or the one Google uses. And they don't deduct any tx fees, so it's pretty good.
That being said, I've seen people (on reddit) complaining about Circle requiring selfie while holding id document, I don't know whether it's true, I was never asked for such. But I'm in UK, so maybe verification requirements are different between the countries or even between states.