Just a few years ago, cryptocurrency mining was considered just a hobby for computer geeks. But today, the crypto phenomenon has exploded into a modern gold rush attracting the interest of millions.
And, although digital currencies are still in their infancy, they are finding their way into many aspects of everyone’s life and finances. But is the potential of crypto big enough to solve one of America’s biggest financial problems? It certainly seems so – find out how crypto can help you pay off your credit card debt below.
Crypto and Your Credit Card Debt: An Overview
With an average outstanding balance of $5,525, credit card holders in the United States often see their household finances rocked by their credit card debt. At the same time, your credit card balance shouldn’t define your financial stability.
From debt consolidation to healthier spending habits, there are plenty of options for paying off credit card debt or reducing the financial burden that comes with it.
And, today, thanks to emerging technologies such as DeFi and digital currencies, there are new alternatives to consider.
Decentralized and based on blockchain technologies, cryptocurrencies allow fast and secure financial transactions. While initially the crypto world only seemed accessible to a few experts, today’s trading platforms are bringing the benefits of digital currencies within everyone’s reach.
In the case of Santa Clarita, the proof of the potential of cryptos is just around the corner. What in 2019 was the US city with the second highest debt ratio in the country, in 2021 is the one with the highest debt repayment. And it’s thanks to crypto!
Crypto-backed loans for debt consolidation
As more traditional investors take an interest in crypto, digital currencies are becoming easier to trade, buy, and use — and they’re transforming the entire financial industry. In turn, more and more institutions and retailers have started accepting this digital asset as a form of payment or collateral, in a way not unlike using cash.
In the case of credit card debt, owning cryptocurrencies such as Bitcoin or Ether can help you secure a loan, which you can use to consolidate your debt or pay off your outstanding balance.
In crypto loans, your assets are treated as collateral for the borrowed money, which means you could end up losing your principal if you are unable to keep up with repayments.
However, crypto loans have significant advantages, including:
- High borrowing limits, up to 50%-90% of the value of your digital asset
- Availability of funds within hours
- Low interest rates
- No or few credit checks
- Wide range of repayment terms
Credit cards with cryptocurrency cashback features
Choosing your credit card wisely is always important in managing the financial burden of credit card debt. But this is especially the case if you plan to take advantage of the debt repayment options offered by crypto – now or in the future.
In this case, choosing a credit card with crypto rewards features is a suitable option for earning while spending. If you choose cards that offer crypto cashback features, such as the SoFi credit card, you will also be able to accumulate points that can be redeemed for fractions of Bitcoin or Ether.
In turn, with the right investment strategy, these can help you grow your portfolio, create additional revenue streams, and start paying off your credit card debt.
Using Your Crypto Wallet to Pay Off Credit Card Debt
In 2018, almost 20% of bitcoin investors surveyed purchased their digital assets through their credit cards, thus increasing their debt. At the same time, the majority of them planned to pay off their balances in the future – thanks to the capital gains realized on the sale of their assets.
And, if you had invested back then, you might have found that the value of your assets had increased more than sevenfold. In this case, you might consider using a portion of your capital gains to pay off your credit card debt.
Due to the high level of risk and volatility of digital assets, investing in cryptos is not for everyone.
However, if you have been interested in the unexplored potential of digital currencies for some time and have taken all the necessary considerations, using crypto to pay off your credit card debt may be a valid alternative. But make sure you always partner with an expert financial advisor and find a reputable credit card provider.