- Nexo has launched its Nexo Card after announcing it in 2019
- The Nexo Card will use your crypto holdings as collateral for a loan rather than liquidating them
- Is this new twist on the classic debit card format a winner?
Cryptocurrency credit provider Nexo has finally launched its Mastercard credit card, two and a half years after announcing it. The Nexo Card uses a crypto-backed credit line that starts at 0% APR rather than liquidating assets, while offering up to 2% cashback with no minimum monthly repayments, meaning that users can keep their assets on the platform with flexibility as to how they pay off the loan. There are, however, a couple of caveats to this new system which are worth knowing about.
The #NexoCard is here!
Welcome the only card that lets you spend the value of your #crypto without selling it!#Hodl while you spend with thе one-of-a-kind Nexo Card linked directly with your Instant Crypto Credit Line!
Get yours now!
1/2https://t.co/saMvEgcgMg— Nexo (@Nexo) April 13, 2022
Nexo Card is Essentially a Mini-loan
Nexo announced the concept of a Nexo Card in August 2019 but it has taken until now to launch it, possibly due to the shifting regulatory sands since the announcement. The format is the same as was announced back then however, being a credit card one as opposed to the typical pre-loaded debit card that has been around in one form or another for around five years.
Spending with traditional cryptocurrency cards typically requires the user to sell the relevant amount of cryptocurrency into the local currency before using the card to purchase, a long winded and cumbersome process for the user. The Coinbase Card changed that with no need to convert your crypto first, although it came with the outrageous fees associated with Coinbase.
“Unprecedented Daily Utility”
Nexo does things differently, with the key factor being that this is a credit card and not a debit card. This means that with every purchase you make you’re taking out credit, using your crypto holdings as collateral but not forfeiting them, which is why there’s no liquidation of assets involved at this point.
There’s also rewards of up to 0.5% (BTC) and 2% (NEXO) on purchases (down from 5% in 2019), while the card also allows cash withdrawals. Nexo also boasts that there are no minimum repayments, monthly fees, or penalties for inactivity. There are also no foreign exchange fees for up to €20,000 per month.
Antoni Trenchev, Co-founder and Managing Partner at Nexo, said of the Nexo Card:
This unique product will allow millions of people, first in Europe and then worldwide, to spend instantly without having to give up the potential of their cryptocurrencies, thus offering unprecedented everyday utility for the emerging asset class.
Careful of the Caveats
While the Nexo Card is a refreshing new option in a marketplace still looking for that perfect solution, there are some caveats (don’t forget, Nexo has to make money from this venture somewhere).
First, the 0% APR offer is only open to those whose Loan-to-Value (LTV) ratio remains 20% or below, otherwise it can rise to as much as 13.9%. This isn’t a particularly high amount, and if the value of your collateral falls during that time it could tip you over that barrier.
Next, the fees. Nexo says that there are some activities that won’t attract a fee, which is great, but regular usage isn’t one of them, perhaps understandably. This means that users need to factor in a 1.49% (EU) and 3.49% (non-EU) processing fee on top of their purchase, alongside any additional fees levied by the card issuer. This is in comparison to Coinbase, which charges €4.95 for a physical card (Nexo offers a free virtual card) as well as a 2.49% fee for liquidating crypto for purchases.
Then there’s the fact that US customers face a minimum transaction spend of $50, while they also “must hold a valid Visa or Mastercard in the same legal name as your Nexo account for your purchases to be processed”. These restrictions somewhat undermine the claim of “unprecedented daily utility”, at least for those outside Europe.
Free Isn’t Free Forever!
The Nexo Card is a nice twist on the crypto debit card genre, but it bears repeating that in using it you’re essentially taking out a mini-loan – a loan that will have to be paid back at some point. If your portfolio is going up in value then that’s great, but you might be saddled with a 13.9% loan to service in the middle of a bear market.
That crypto might not stay unliquidated forever!
