What matters most
- Direct Pay currently spends eligible USDC first and LiquidUSD second without creating a loan.
- Borrow mode keeps collateral invested but creates a variable-rate balance that accrues interest immediately with no grace period.
- A refunded Borrow-mode purchase credits the vault but does not automatically repay the outstanding loan.
Facts checked against the sources listed below on 03 Oct 2026. Terms can change after publication.
Some links may generate a benefit for Galeora. Our research criteria and conclusions remain independent.
How Direct Pay works
Direct Pay currently deducts purchases from eligible stable-value assets in the Ether.fi Vault. The official guide says USDC is used first, followed by LiquidUSD when the USDC balance is insufficient. Other vault assets are not currently direct-spend assets.
No borrowing interest is created in this mode. The asset is converted into the required purchase currency at sale, so exchange-rate and card-transaction terms can still matter. Direct Pay is the simpler route for routine purchases when the user already intends to spend the eligible balance.
How Borrow mode changes the transaction
Borrow mode uses eligible vault assets as collateral and adds each card purchase to an outstanding loan instead of selling the collateral. The current rate is a variable APY set by the underlying lending market and shown in the app.
Interest starts immediately, compounds over time and has no grace period, billing cycle or minimum repayment schedule. Keeping market exposure can be useful, but the relevant comparison is reward value versus interest, collateral risk and the cost of eventually repaying the loan.
LTV and liquidation risk
Each collateral asset has its own loan-to-value limit. A card purchase in Borrow mode can be declined when there is not enough borrowing power, and market movements can raise the LTV after a purchase.
If the position reaches the liquidation threshold shown in the app, collateral can be sold automatically to restore the required health. Ether.fi displays LTV and health indicators, but warnings do not remove the need for a conservative buffer.
The refund detail that is easy to miss
A Borrow-mode refund is credited to the vault's main balance. It does not automatically reduce the loan created by the original purchase. The user must make a separate repayment to lower the outstanding balance.
This means interest can continue after a merchant refund if the loan is left open. Review both the card transaction and borrow balance rather than assuming the refund reverses the complete financing path.
When each mode may fit
Direct Pay is generally easier to model for everyday spending because it uses a known eligible balance and does not create borrowing interest. Borrow may fit a user who deliberately wants to retain an asset position and is prepared to monitor a variable loan and liquidation risk.
Cashback should not decide between the modes because the financing consequences can be much larger than the reward. Before selecting Borrow, check the current APY, projected holding period, collateral volatility, health factor and repayment plan.
Frequently asked questions
Which assets can Ether.fi Direct Pay spend?
The current official guide says Direct Pay uses USDC first and LiquidUSD second. Other vault assets are not currently eligible for direct card spending.
Does Ether.fi Borrow mode have an interest-free period?
No. Ether.fi says interest starts immediately and there is no grace period or billing cycle.
Can Ether.fi collateral be liquidated?
Yes. If the loan reaches the applicable liquidation threshold, collateral can be sold to restore position health.
Does a card refund repay an Ether.fi loan?
No. In Borrow mode the refund credits the vault, but the user must manually repay the outstanding borrow balance.
Primary sources
We prioritise product documentation and official provider publications. These links support the factual claims above; they do not determine our conclusions.