Probably most of you have heard about BlockFi's soon to be released credit card that gives 1.5% cashback in BitCoin. Well, I got up this morning and decided I would go ahead and get one. After all free money is good right? But is it really free money? Let's dig in a little closer and see why I'm not sure it is a good deal.
The Pitch
The pitch for the BlockFi's credit card is pretty straight forward.
Earn 1.5% cashback paid in Bitcoin
1.5% cashback isn't great but it isn't terrible either.
For comparison, my Discover card pays 1% cashback on everything, and rotates 5% cashback on various segments like gas or restaurants every three months. My Amazon Prime card pays 1% on everything and 5% on Amazon purchases.
I thought this would be a nice card to have to add a wee bit more cashback (0.5%) on those things that I'm not getting 5% back on from my other cards. And of course what really attracted me was that it was going to be paid in Bitcoin straight into my BlockFi savings account where it would be earning interest (currently 6%).
Welcome To The Wait List
So I decided this morning I would go ahead and get on the wait list. The card isn't available yet but is expected to be available in early 2021. Since I already have a BlockFi account it was just a quick click to add my self to the wait list.
Wow, that was easy.
The Fine Print
Now that I'm on the wait list I decided I should read up a little more on the details (I probably should have done that first... but hey). Luckily the welcome page included two links to get some more information including a blog post and a FAQ.
Scanning the blog post I first see that you will also earn $250 in Bitcoin when you spend $3000 in the first 3 months, which at first sounded great!
Woo Hoo! More free Bitcoin!
But then I found out the card has an annual fee of $200 per year.
$200 annual fee? Forget that!
Now I'm not so sure I want this card and decided I needed to do a little more thinking and see if it made financial sense to get a card with a $200 annual fee.
Running Some Numbers
With the fairly high annual fee I had to do a bit of math to see if it made sense to get this card.
Hey! I was told there would be no math.
First, lets look at year 1. Assuming I can spend enough to get the $250 reward, the card would pay me $50 plus the 1.5% cash back for that year. Normally, I would be a bit worried if I could spend that much in three months but I have a big home improvement project planned for the spring, so if I can't get this card before that I will have no problem meeting that. As such the math is fairly easy, $50 + 1.5% of my spending. Since I only plan to use it for the "everthing else" category I'd estimate that spending at around $500/month, or $6000 per year.
$250 + ($6000 x 0.015) - $200 = $140
Of course, I'm already earning 1% cashback so gain is only 0.5%.
$250 + ($6000 x 0.005) - $200 = $80
Based on this it looks like year one is worth having the card. $80 isn't life changing, but every little bit adds up over time. Again, that assumes I will be able to meet the $3000 in the first 3-months spending requirement.
Now let's look at year 2. In year 2 the math isn't nearly as kind.
($6000 x 0.005) - $200 = - $170
Rearranging the variables you can calculate the amount you would need to spend every year to just break even.
$200/0.015 = $13,333
But again, I'm only really gaining 0.5% cashback since my other cards are giving me 1%.
$200/0.005 = $40,000
There is no way I'm spending $40,000 per year so the BlockFi card is not worth it for me in year 2.
Conclusion
For me, I will likely go ahead and get the card since I'm not going to have a problem meeting spending requirement to get the $250 reward. However, I'm going to cancel that card before year 2 as there is no way it will be profitable for me in year 2 and beyond.
A Word of Warning On Credit Cards
I thought I should add some thoughts on credit cards.
I hate debt and credit card debt is the worst kind of debt. The interest rate on credit cards is some of the highest interest you will likely ever pay, and the fees for missing minimum payments are significant. Once you start getting behind it can be very hard to climb back out.
NEVER buy anything on credit cards unless you can pay them off at the end of the month.
I have been using cashback credit cards for decades now. My wife and I are very good about always paying our cards off in full every month. I'm happy to say that in the 40+ years I have been using credit cards I have never paid a penny in late fees or interest and have earned a few grand in cashback.
Are you thinking about the BlockFi cashback credit card? Drop a note in the comments and let me know what you think about this offer.
Till next time, Cheers!
The Crypto Oracle
