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Wells Fargo Bans Cryptocurrency Purchases on Its Credit Cards (bloomberg.com)
332 points by petethomas 8 months ago | hide | past | web | favorite | 269 comments

A few Canadian banks did this back in December.

If this upsets you view it through the lense of risk management than any sort of value judgement of crypto currencies.

If the rate of charge backs starts climbing the issuing bank will take notice. Investing is not something that should be done on credit, especially for something with the volatility of crypto currencies.

> A study conducted by LendEDU last year found that roughly 18 percent of Bitcoin investors used a credit card to fund the purchases. Of those, 22 percent couldn’t pay off their balance after buying the digital coin.

This is just depressing:(

I only bought my crypto with credit because I wanted the reward points.

I paid my bill off the same day my purchase cleared.

Why can't we just use the existing credit reporting system to manage risk here? Those 22% of investors that were unable to pay off their debt can just suffer a blow to their credit score for irresponsible spending.

Spending credit on crypto isn't a sign of risky behavior - spending more than you can pay off and failing to pay off what is owed is.

Credit card companies have closed other “buy money on a card and get rewards points” loopholes, I just see this as another such loophole.

I think this is a big part of it.

Even on cards without any rewards, credit cards already have a way to get money from your credit card: cash advances, and they carry a higher interest rate and lower limit generally.

Blocking transactions with particular vendors as well as classes of vendors is part of the current system of managing risk. Banks already have arbitrary power to decide what transactions to allow.

buying crypto is a sign of risky behavior on its own :)

Not sure why you're being downvoted... if we accept as true the assumption that the majority of crypto purchases are speculative investments, and not purchases with the intent to use the crypto to directly buy goods, then yes, buying crypto is indeed a sign of risky behavior, since holding crypto as an investment likely gives you a similar risk profile to holding junk bonds or investing in penny stocks.

> Spending credit on crypto isn't a sign of risky behavior -

It most certainly is if you cannot afford to pay it off after making the purchase. The get rich quick aspect of crypto enticed these people to leverage their credit card.

Did you just quote half of a sentence and refute it using the qualifier provided by the second half of the sentence?

This was the full sentence:

> Spending credit on crypto isn't a sign of risky behavior - spending more than you can pay off and failing to pay off what is owed is.

This part:

> spending more than you can pay off and failing to pay off what is owed is.

is equivalent to your statement:

> It most certainly is if you cannot afford to pay it off after making the purchase.

Again, spending credit on crypto isn't the risky behavior.

Borrowing money you cannot pay back is the risky behavior.

Just because people were enticed by cryptocurrency doesn't mean that cryptocurrency is the problem. The problem is spending more money than you can afford to spend.

We already have a system of checks and balances for this. If you borrow more money than you can pay back, you take a hit on your credit that can last years, and banks will trust you less in the future for your high-risk behavior.

Anyone with a credit card should be able to use their line of credit to purchase anything they please - your history of paying the debt back is all that really should matter, not what you spent the money on.

Its probably also about fraud and chargebacks.

Take a look at what AMEX said when they banned porn 18 years ago:


>"The decision was ... based on about a year's worth of work we've done with this industry," Fisher said. "There was an unacceptably high level of customer disputes. We worked with the industry, but the challenges remained, and we just decided it was no longer profitable or practical to work with this industry."

(I think I recall reading porn companies pay exorbitant credit card processing fees due to high chargebacks.)

I can imagine a higher than average percentage of Bitcoin purchases were fraudulent and the card issuers were having to deal with a ton of chargebacks and disputes. If these purchases yielded more cost than profit, they'd be crazy not to ban them - you don't participate in a business activity where you are losing money.

> Anyone with a credit card should be able to use their line of credit to purchase anything they please

There is no "should". The lenders are private companies who are lending you money at their own discretion; it's entirely their prerogative to stipulate how that money can be used. Naturally, when a certain product category has a high default rate, the lenders act in accordance with their self-interest and stop allowing their money to be squandered by blockchain gambling.

> We already have a system of checks and balances for this. If you borrow more money than you can pay back, you take a hit on your credit that can last years, and banks will trust you less in the future for your high-risk behavior.

There's no reason the banks cannot be proactive in assessing risk and protecting themselves from high-risk purchases. You can't buy poker chips or stocks with credit cards; a ban on buying crypto with credit is in line with this.

Your history of paying the debt back is likely to change for the worse if you're buying some shitcoin with the expectation of reselling at a profit rather than budgeting for repayments from your salary like if you'd bought food or a sofa. Credit card companies have an interest in not supporting behaviour which makes clients a higher risk than their current credit rating would suggest, and that includes not funding gambling or investment products. Especially where the product class is also disproportionately likely to be used as a means of converting a stolen card to untraceable cash and disproportionately likely to be subject to merchant fraud.

The overlap between the set of people who "invest" beyond their means in cryptocurrency and the set of people with so little grasp of risk management they express views like "anyone with a credit card should be able to use their line of credit to purchase anything they please" is of course another strong reason for them not to want to touch crypto with a bargepole...

Again, this assumes that everyone buying cryptocurrencies are financially irresponsible people.

I have been doing this for years. While I have been lucky to consistently pull a profit, I never invested more than I could afford - and I certainly never planned to see a single cent I invested return to me (as one should assume with any investment).

If you are buying any cryptocurrency with the expectation of reselling at a profit, and you are falling into more debt than you can afford to be in while doing so, the issue was never cryptocurrency, but rather your willingness to borrow more money than you can afford to pay back.

Given that profits were never a guarantee, anyone expecting guaranteed profit already exhibits the kind of high-risk financial decision-making that deserves a low credit score as a consequence for unpaid debts, regardless of what they spend the borrowed money on.

It's not even about financial responsibility; I'm in no way advocating for chargeback fraud, but people overwhelmingly win disputes and the way these payments are processed promote ease-of-use and ease-of-disputes.

Crypto companies could default to push payments and/or micro-deposits for verifying ownership of a fiat instrument, but people want their coinz now and that causes friction that shrinks user activation funnels.

Merchants have to keep their CB ratios under 1%, or else Visa/MC/the bank processing their fiat will fire them. Bank fraud analysts probably have their own bank-side incentives to give customers the benefit of the doubt, and it's too easy for someone to maliciously load up on 2+ months of purchases, walk to their bank, state "I've never heard of Bitcoin someone hacked me and bought $6k in crypto I need that back", and win.

This assumes, based on the actual evidence, that the set of people who buy cryptocurrencies on credit are more likely to default on them than a set of people with the same credit ratings buying sofas (and that raising APRs to cover these increased losses will have other adverse affects on a credit card company's business).

If people are speculating beyond their means in crypto because they think the line of easy credit gives them a means to make a profit out of it, it's far easier for everyone involved to just cut the line of easy credit for the crypto, because the same person is probably not going to try to make a profit loading up their card with consumer goods or cars or other things the credit card company doesn't mind extending credit for instead.

I really don't understand why you believe it is reasonable or preferable to oblige credit card companies to take losses instead.

credit cards charge a fee, which you get some back as rewards. which exchanges allowed for feeless credit card purchases?

I paid like $5 in fees, but earned like $20 in cash back.

The rewards outweighed the fees.

You of course know most people don't pay the balance off like you did, in which case the typical consumer would pay WAY more than the $20 in cash back.

I used to think banks hated us people who paid off our balance every month, but they still make money on us too...

The fees the vendor pays outweigh the cashback too. He says he paid $5 in fees, but that doesn't include the vendor's fees, which were probably baked into a lousy exchange rate.

I don't think there's any card that offers more than 1.5% cash back on everything (some offer above 1.5% on certain things). And most fees are at least 2%, so just on the transaction fee alone they cover the cost of points/cashback.

Depending on which banks. Some banks like Citibank and Capital One are known to target the subprime market. They expect to earn more from interest than from interchange fees. Others, like American Express are the opposite. See here for a table: https://www.reddit.com/r/churning/comments/5oucdq/the_econom...

> I don't think there's any card that offers more than 1.5% cash back on everything

Not quite true. For example the Citi Double Cash is a card that earns essentially 2% cash back.

> And most fees are at least 2%

Also not true. It depends on your card category (MasterCard World, MasterCard Elite, Visa Signature, Visa Infinite, etc) and purchase category. This is just the interchange fee, but even including other types of fees, a basic no-frills card can easily cost the vendor <2% in total fees.

See all the MasterCard interchange rates (Visa is similar): https://www.mastercard.us/content/dam/mccom/en-us/documents/...

Interchange rates on Visa are >2%, and there's definitely cards that offer 2% cash back on everything, with the exception they generally bar "cash-like" items like cash withdrawals and t-bill purchases, to avoid holders just churning purchases for the rewards. (There used to be a way to make tons of points for buying like $10K of t-bills on your Visa, then immediately reselling them for $10K, because the Treasury wasn't charging the interchange fee.)

Citi offers 2% cash back on everything with their DoubleCash card. It's the highest general purpose/non-category-specific card as far as I know.

Betting on crypto with your credit card is a bad idea, full stop.

But I remember in 2013, I read about someone who was planning on maxing out their credit cards to buy Bitcoin at $90. I was exhorting them not do it...

Ha. I wonder how they fared.

I think that's the difficulty of being rational and prudent. A few lucky people will get lucky through chance alone. It doesn't mean the process was a good idea and the same is true of the reverse: you can have a great plan but sometimes chances get stacked against you. I loved the book "Fooled by Randomness". Well worth a read if you haven't. Your advice to your friend was sound. There's nothing to regret.

Nothing to regret? If he bought $5k of btc at $90 it would be worth over 300k, even after the crash.

Yall are throwing your conservative investment advice at everyone and backwards validating your risk-adverse behavior.

> Betting on crypto with your credit card is a bad idea, full stop.

Because it's gambling, and a lot of the currencies won't work at scale, so it can be considered a 0-sum game.

> But I remember in 2013, I read about someone who was planning on maxing out their credit cards to buy Bitcoin at $90. I was exhorting them not do it...

Hindsight is always 20/20. If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height.

> Hindsight is always 20/20. If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height.

I worked as the sole IT person in a big (~300 computer) university department. My predecessor had placed folding@home (IIRC) on many of the lab computers. This was around 2009-2012. I removed it; he didn't have a "team" assigned or anything so I didn't think much of it.

I didn't hear about cryptocurrency until late 2012, but occasionally the "what if" pops in my head and I go -- I could have put a lot of miners at 50% load -- even just at night and made quite a bit had I waited till the first boom (~2014), or lots if I held till now. Highly illegal, but unlikely to get caught.

But that's a lot of "what-ifs", and it's all easy in hindsight. Useless to dwell on it, but hard not to sometimes!

If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height.

I know a few people who mined a few coins for "shits and giggles" and then lost/deleted them before the whole cryptocurrency thing really started going because they thought it would never happen. I might have had some at one point too.

I don't think they were saying they would buy it on credit, just that they would use their credit card to make the transaction (and then pay off the credit card at the end of the month).

They are using the fraud protection part of their credit card, not the loaning money part.

shrug I bought my first Mac in 2002 as I was quitting my job to go back to college. It was immediately obvious to me that Apple was going places, and I was seriously tempted to buy as much Apple stock as I could swing.

It would have paid off mightily.

That said, I couldn't afford it. It was a bad decision for me then, so I'm glad I didn't make that decision. It was the right choice, even though it would have been very profitable.

The beauty of hindsight ... it's 20/20, let us never forget that :)

I was broke in 2011 due to a founder flaking on a startup we were building. Discovered Bitcoin. Did the math, proved to myself it worked. Maxed the credit card with a cash advance, bought in person, then got a job to pay off the card.

Just do the math. Don't listen to people and their hard and fast rules. If you think 200x or 1000x is possible just do it and make sure you take some off the table after it 4xes so you're always up.

I honestly don't see a thing different between your story, and someone who maxed out their card to bet on roulette.

Because you haven't thought about bitcoin and cryptocurrency enough and instead let others think for you. It's pretty easy to tell the difference between roulette and crypto - including the existence of a house third party.

Yes, because everyone who doesn't share your unicorns and rainbows vision of crypto clearly has not thought about it. It couldn't possibly be that there are people who disagree with you.

I once aske my uncle his thoughts on investing in bitcoin in cash. Price was about 10 bucks a coin. We both regret talking ourselves out of it

There is no point in regretting such things. You could not have known what would happen to the price of Bitcoin. You probably would’ve ended up selling it for a tiny profit and then you’d still be regretting your actions, or even you could’ve panicked at some point when it dipped a little bit and sold at a loss.

or lost em in mtgox.

I wouldn't beat yourself up over it. As other commenters have pointed out, nobody knows or could have known where Bitcoin was going to go, unless they were in control of substantial liquid leverage and knew that they could constrain supply indefinitely.

And even then, holding a corner on supply of an untested asset is still no guarantee it will perform. Sergey Brin and Larry Page tried to sell Google to excite.com for a paltry $5MM ... and Excite turned them down. Even they, who of all people should have had the utmost confidence in the future (and control over supply)of their own brainchild asset, didn't fully understand the significance of what they were sitting on.

I was talking with my wife (then gf) about putting $1000 into BTC back when it hit $1. I don't let it eat me up though, I'm not a gambler, and it's quite likely that I would have sold at some point.

Though.. if I had my wits, hopefully I'd be selling off chunks. Ie, at $18k/coin I wouldn't sell the whole thing.. though, at only $100/coin it would have been tempting.

Ah, life.

But you'd likely be a lot better off. Putting $1,000 into something promising isn't gambling, it's smart.

While no one likes throwing a grand away, it's also not a lot of money in the grand scheme of things. So why not take a chance? It's not like you'll see 20 opportunities to invest money into something pop up every year.

People in general are too conservative. You should allow yourself to take (calculated) risks once in a while.

At the time it seemed like gambling. Everyone thought it would come crashing down at any time. It was the forward thinkers and the heavy risk takers that invested. On top of that, only crazy people ever though it could hit 20k.

Ask your uncle his thoughts on investing in baseball cards and comic books, too.

Same as me when I wanted to buy $20,000 at $230.

Did not become a millionare...

The problem is you don't know when to sell it.

A friend of mine got super lucky with crypto, though, because he lost his password.

He bought Ethereum when it was being hyped on Kickstarter and mostly forgot about it. At the end of last year, he saw the price, freaked out, and figured out how to crack his own password.

So, he ended up buying at the lowest point and selling at a very high point, like $700. I think he made a few million on it.

$700 is closer to the midpoint of the historical price.

Source: someone who should have sold at 1400 and joined the millionaire club.

You can sell gradually.

Or you sell for what you need, when you need it. Ie, if I had the coin I was debating buying (~1k coins), I wouldn't remotely need to sell them all now. I could retire off a small amount of them, there's no need to sell them all.

I'd sell what gets me retirement now, and hold onto the rest - see where it takes me.

Im looking to dump most of what I have in favor of investing in multi family real-estate. I got big into mining eth starting back in the test net days.

It's paid for some dumb stuff along the way to where I am now, chartered helicopters to Macau, laps around the Nürburgring, ect, but the price of all this shit has become so decoupled from the underlying technology and mostly scams at this point that I want to own something "real".

Yeah that's the way you buy&sell stocks if you are investing. Not just gambling

And buy gradually too for that matter. There's no way to time a peak/dip so this obviously spreads out your cost basis in case you're buying at the peak. You can also look at it as dollar cost averaging and continue to buy it as it goes down, again reducing your average cost.

Same as my neighbor when ve wanted to buy $20,000 at $20,000.

(Just wanted to add an example where the based saved some people)

If you play russian roulette and "win", would you say that that was a good strategy? Would you do it again?

They might hire you as one of their risk-averse financial advisers/asset managers next ;-)

Pay off your debt and invest in low cost index funds, kids. Max out your Roth IRA and 401k if possible.

Feel free to Venmo me consulting fees.

"22 percent couldn’t pay off their balance"

Incorrect. Apparently a lot of users intentionally chose to not pay it. The original study (link: https://lendedu.com/blog/bitcoin-and-credit-cards/) asked whether they did pay it off, not whether they could. See question #3 and #4. A crucial, but important difference that changes the interpretation of the study.

I get what you're saying, but the vast majority of people who have not paid their debts aren't doing so intentionally. Why choses to owe more in interest when they can afford to pay the debt?

I think in the absence of actual numbers, it's pretty irresponsible for you to assume that "a lot of users intentionally chose not to pay it", just because of the way the question was phrased.

Sure, there were some people who just decided damage their credit and owe thousands in interest because they couldn't be bothered to pay their outstanding debts, despite being able to afford doing so. I would not expect this group of people to be substantial - certainly not "a lot of users".

«Why choses to owe more in interest when they can afford to pay the debt?»

Easy: they could expect to make more profits than the cost of interest.

«I think in the absence of actual numbers...»

In the absence of actual numbers, the journalist is simply jumping to conclusions by assuming everyone is unable to pay the debt.

>Easy: they could expect to make more profits than the cost of interest.

This is all anecdotal now. You took a semantic argument and you're running entirely too far with it now.

>In the absence of actual numbers, the journalist is simply jumping to conclusions by assuming everyone is unable to pay the debt.

Which is a fair assumption.

If you zero cash, and $15k in debt, you will not be able to pay your debt.

If you have $10k in cash, and $15k in debt, you are insane not to pay off as much of that debt as you can with that $10k, because the interest will keep accruing every month.

People who fail to understand these concepts likely already have a terrible credit rating because they lack the common sense to avoid making bad decisions with debt.

In this case, if interest paid < yield. If someone wanted to give an SPV I controlled a loan tomorrow for a few million dollars to invest in crypto, at 20% a year, I would happily take it. But miracles sadly don't happen.

I suspect this is less about the credit risk of the cardholders than the risk of unrecoverable fraud, although there's also the theoretical risk of some kind of fraudulent conveyance by the card holder.

Fraud: I steal someone's credit card and use it to buy crypto, then move that currency somewhere unrecoverable. The card company is unable to recover anything. (This can be mitigated by recovering from the exchange in some cases.)

Fraudulent conveyance: Holder maxes out all their credit cards buying crypto, hides it, then claims bankruptcy. Card companies can't recover anything. (Yes, you could do this with something like gold, but it would be a lot harder to hide and sell later on.)

Everything else you buy on your credit card has an expected future value of $0.00.

Why shouldn't you be able to buy things with arguably non-zero EFV as long as you are in good standing on interest and principal?

Because when you are buying "everything else", you expect its EFV to be around $0, so most of the people budget it accordingly. But if you are buying an asset hoping that the 100% annual return will pay your credit card interest and help you catch up with your rent, and that growth doesn't happen, it's 2008 all over again.

All this really means is that the banks' analysts are substantially more skeptical about cryptocurrencies than their average customers and they are trying to reduce their own risks.

>But if you are buying an asset hoping that the 100% annual return will pay your credit card interest and help you catch up with your rent

If someone borrows more money than you can afford to pay back because you expected a guaranteed profit investing in a high-risk market, the cryptocurrency was never the problem.

Their completely irresponsible use of debt was the problem.

People can just as easily sink all of their liquid cash into cryptocurrencies, subsequently lacking the capital to repay their exiting debts.

People. Credit. Budget. ... Choose any two.

You don't want to loan money to people who go broke. That's the thing credit card companies want to avoid the most. The whole point of the credit system is to prove that you are someone who pays back their debts.

In this case, likely many otherwise reasonable people are all suddenly making bad investments before their credit history can catch up to it. The CC company wants to avoid that risk, and so bans that type of purchase to get ahead of it.

Actually they couldn't care less if their customers go broke; it happens all the time. They just want their customers to take a long time to go broke, to make lots of charges (transaction fees), and to carry large balances (interest fees). When they're sure you're broke and they can't extract any more fees from you, they'll close your account and charge it off to a debt collector.

John Maynard Keynes almost said, "In the long run, we're all broke."

That's not really true, unless the only things you buy with your credit card are services and perishable goods.

The credit card companies' business model is similar in some ways to insurance. They skim a bit off the top of each transaction, and in exchange they bear various kinds of risk. One kind of risk is default/bankruptcy, as another commenter has mentioned. There's also the problem of fraud: since cryptocurrencies make it relatively easy to launder money, a Bitcoin purchase is disproportionately more likely to be fraudulent, even if the account is otherwise "in good standing".

(Note that it may also make sense to discourage or disallow gambling on credit for public policy reasons. For example, a number of states already prohibit the sale of lottery tickets using credit cards, even though those tickets have a non-zero expected value.)

Credit card companies main business is in transaction processing (both for customer-vendor transactions, and for helping banks administer these revolving loans to customers). The insurance is one feature, not the whole model.

Eh, to be that guy on the internet, I’ll argue that when I’ve had to put things on credit, they’ve been done in service of a future higher income, like spending more time working on my degree than taking up a low-paying job to cover my present expenses.

Buying investments of dubious value on credit though...isn’t this how the 20s ended?

Just chiming in to say what really needs to be said here:

If you use your credit card to pay for things you cannot afford, you are only doing yourself financial harm.

Credit cards are for building credit, generating rewards, and short-term borrowing.

If you are charging thousands of dollars to your credit card and planning to pay it back years later when you make more money, you're effectively just paying 1.5-2.0x the cost for everything you buy, because every year you are going to pay at least 15% in interest, and since you are spending more money than you make your debts will never go down.

Don't borrow from your future self. It makes no sense, and there's literally no guarantee that you'll ever make more than you do right now.

Buying an investment of dubious value... Nope!

Buying a non-investment of dubious value... Yes!

Buying a different investment of dubious value... Yes! (commemorative coins, stamps, comics, beanie babies, etc)

LendEDU is a shill site run by a student loan company that (probably) fabricated survey results.


> Investing is not something that should be done on credit

That's how the real fortunes are made. Invest on credit, reap the profits if it works, leave the credit supplier holding the bag if it doesn't.

Rinse, repeat until you hit a live one.

When Bitcoin was increasing 10-25% a month, makes total sense to max out your credit and pay off your balance the next month. Not sure if this was a risk-tolerant move, or just a risk-ignorant move.

> That's how the real fortunes are made. Invest on credit, reap the profits if it works, leave the credit supplier holding the bag if it doesn't.

Not all debt is created equal however. Credit card charge-offs can trash your FICO score, and I suspect many who are using credit card debt to fund "investments" are more highly dependent on their consumer credit than those buying real estate with house money.

>When Bitcoin was increasing 10-25% a month, makes total sense to max out your credit and pay off your balance the next month. Not sure if this was a risk-tolerant move, or just a risk-ignorant move.

No it didn't! There was no guarantee that the value was going to keep going up! If you invested like it was a guarantee of profit, you absolutely should never ever invest - even if you managed to profit off of BTC.

Remember, for every person buying Bitcoin because the price was going up, there was somebody else selling it because they thought the price was likely to drop. In a speculative market, you cannot look back at past performance and declare it "makes total sense" for everyone to have had invested recklessly during that time period.

You'll likely use that same excuse to invest wildly again later when it looks like a sure-bet again, and if you're wrong (as many people have been in crypto markets) you stand to lose a massive amount of your net worth in the process.

I think the voice of my comment didn't come across properly, but if you read the 2nd half, I was trying to express my cynicism about that position. That's why I referred to it as "risk ignorant".

Right, there are similar issues with porn and gambling -- people scream bloody murder about "don't judge me for that" but it's mainly an issue of the extra expenses from customers who swear up and down that "no, not me, I didn't buy that, please reverse the charges" and the processor having to investigate.

.. And make an absolute fortune on chargeback fees in the process. What problem?

> view it through the lense of risk management than any sort of value judgement of crypto currencies.

That a third party is involved in deciding whether or not a purchase is too "risky" to allow is precisely why I want to move to cryptocurrency instead of banking.

When you use a credit card to buy something, you are borrowing money.

It is entirely reasonable that your would-be creditors can refuse to lend you money for certain kinds of purchases.

Well it’s their risk though as they need to arbitrate disputes.

They won’t stop you from paying with YOUR money, but if you use a credit card, you are paying with your bank’s money. They will then charge you for it. If many peope can’t pay the money back, the bank looses.

You’re missing the point. They were spending the banks money, not their own, and they are struggling to pay it back. How will you raise money for investing from a crypto?

They are spending their own money the same way you would be if you bought a tv.

Not when the transaction is happening. The bank will charge you later. If many people can’t actually pay at that point, the bank will loose.

Apply that to crypto. When your balance is zero, how do you get a tv?

Have you never canceled a fraudulent charge or had the credit card company flag something that you didn't purchase?

Literally never.

So when someone asks you for money, you don't ask questions, you just give it to them?

Take stats like this with a grain of salt. The can easily be tortured into saying what you want. I wonder how many couldn't pay their balance at the end of the month regardless. I mean, it is a rolling credit system. A lot of people only ever pay the minimum.

If they are truly doing this to protect vulnerable customers, that's great. It'd be a rare occurrence though. Credit cards are basically designed to sneak credit into people's lives, by merging it with a payment method.

They're doing this to protect themselves, and by proxy, their customers. Incentives are aligned.

> This is just depressing:(

What about it is depressing, the bad credit these people now have? I doubt they were all actually broke, they just didn't pay off the debt because it's dumb.

I'd find it depressing if the individuals actually paid it off... the sensibility of walking away and taking the bad credit is precisely why these credit companies are prohibiting this class of purchases. It's not a favorable scenario for the creditor.

> Investing is not something that should be done on credit

I suspect you mean in the specific case of gambling on cryptocurrencies with consumer credit.

However, people purchase all sorts of investments on credit as a run of the mill occurrence. Houses, shares, forex. There are usually specific loose types for each investment type, purchasing a house on a consumer credit card would be fairly crazy.

Not only that, if you trade options or other futures, you are literally required to trade on margin (credit).

That's supposed to say "There are usually specific loan types...". Too late to edit.

If they don’t trust people to decide what to spend their credit on, they should not get credit cards in the first place imho.

So, 4 percent of people buying Bitcoin are doing so on credit. Does not seem so depressing. Normalize by the amount invested and it probably drops to less than 1 percent.

Card swiping/virtual terminals are given at the discretion of the payment processors. Credit limits are at the discretion of the issuer, and are the ceiling of what they consider worth the risk. It sounds like the issuers, once again, had too high of a ceiling and then people defaulted. Very little to do with cryptocurrency.

> 18 percent of Bitcoin investors used a credit card to fund the purchases

Nothing wrong with that.

> Of those, 22 percent couldn’t pay off their balance after buying the digital coin

Ohhhh no.

>If this upsets you view it through the lense of risk management than any sort of value judgement of crypto currencies.

Personally I view it through the lens of a being a customer. If Wells Fargo doesn't support payment for as wide a range of goods and services as a different bank, then I will close my Wells Fargo account and take my business elsewhere. They are perfectly within their rights to offer whatever services they want, and I'm perfectly within my rights to reject their substandard offer and accept a more flexible offer.

Well yes, but is it any worse than people who use credit cards to fund "retail therapy"?

I don't think 22 percent of those taking 'retail therapy' are defaulting.

I find it kind of ironic though. The risk of crypto currencies is too high, yet the company was ok with creating fake accounts that could totally have been used for fraud.

More likely they are afraid that it will be a high cost for them with very little reward.

> The risk of crypto currencies is too high

> More likely they are afraid that it will be a high cost for them with very little reward.

That, that, that is the same thing.

Sorry, since when did credit card companies start discouraging reckless spending behaviour? This is dimension C-137 right?

To be totally fair, and I know I’m a data point of one, I bought some crypto currency on my credit card (about $75 worth) because I don’t really trust any of these exchanges not to screw up and leak my info, or screw up and charge me improperly. And it’s a lot easier to report a fraudulent credit card charge than get your money back. In fact, this follows my pattern of “buy everything on my credit card unless the merchant absolutely refuses to accept credit”.

> because I don’t really trust any of these exchanges

And Wells Fargo agrees!

To paraphrase you: you used your credit card because you felt the transaction was a risk and wanted to shift that risk onto another party. Banks don't like their legislatively-mandated fraud forgiveness being used as a risk buffer, and this is the tool they have in their box to deal with that.

Actually, these are two different risks. nomocrypto is worried about the risk that the exchange will misuse his payment information to make bogus bank transfers; Wells Fargo is worried about the risk that nomocrypto will fail to pay back the card. The credit card issuers are not particularly worried about fraudulent "merchant" charges.

I'm not sure that's a distinction with meaning. Ultimately nonocrypto is worried that the exchange will behave in shady, fraudulent ways to which he doesn't want to be exposed. Ditto for the bank. The fact that the most obvious expression of those two kinds of fraud are different doesn't really change the risk analysis much. Someone willing to game one end of a system is likely to try to game the other.

> The credit card issuers are not particularly worried about fraudulent "merchant" charges.

Sort of true, but... isn't that exactly what happened here? The reasons banks don't sweat merchant fraud is that they can just refuse to do business with them. And here Wells Fargo is preemptively deciding that all exchanges are shady.

Chargebacks aren't a risk between cardholder and bank/processor. Vendors pay chargebacks, so chargebacks are a risk between vendor and bank. If a vendor is high-chargeback, or at risk of not paying back chargebacks, bank/processor should ban the vendor.

non-payment of credit card debt is risk between cardholder and bank/processor. bank/processor should prefer to ban customers like this, not vendors (if possible). Customers can "launder" money through many sources (cash advance, cashback, shady businesses) if they intend to put that money in a speculative investment and maybe not pay back the debt.

bank vs processor is another dimension of complication to sort out.

Well, presumably Wells Fargo is worried about two things: The buyer not being able to pay them back AND that the buyer's card details are being used fraudulently.

Can't ding their credit rating if their card details got stolen.

> Wells Fargo is worried about the risk that nomocrypto will fail to pay back the card. The credit card issuers are not particularly worried about fraudulent "merchant" charges.

Yes, they are different risks. But the issuer is still worried about fraudulent charges initiated by the merchant, in addition to the risk that nomocrypto will fail to pay off the balance.

> But the issuer is still worried about fraudulent charges initiated by the merchant

Are they though? Generally the risk of merchant fraud is borne by that merchant's processor. There is some overhead for the issuer in processing chargebacks, but if this were an issue then we'd expect to see many other types of fraud-prone online merchants being banned.

It seems clear that this is an extension of the common prohibitions on using credit cards for gambling.[1] But I should add that it's not that they're worried about failure to repay. That risk is generally controlled by credit limits. It's the fraudulent chargebacks that cardholders initiate when they lose their money.

[1] https://www.creditcards.com/credit-card-news/10-things-credi...

> Are they though?

Yes, they definitely are. Trust me on this one.

"...because I don’t really trust any of these exchanges..."

Not to put too fine a point on it, but that's exactly why many banks will begin to take actions like these. It is terrible though that crypto purchases are starting to be placed in the same risk category as porn.

(Actually, now I think about it, crypto is being put in a HIGHER risk category than porn. Ouch.)

> (Actually, now I think about it, crypto is being put in a HIGHER risk category than porn. Ouch.)

Which isn't unwarranted. Porn companies have challenges, and as shady/deceptive as some of them are in rebilling, they also have a limited number of processors they can use, so they have an interest in not getting kicked off.

Shitcoins don't care. Milk up all the cash you can, disappear. Who cares whether the processor cans your account?

What are you even talking about? Shitcoins? These are exchanges which have just as much reason to want to keep their credit card processing as any business.

Sure, but the problem is the seemingly very high amount of shady behavior in cryptocurrency. EG: In one category, you have reports like this that say 81% of ICOs are scams. (https://www.bleepingcomputer.com/news/cryptocurrency/81-perc...)

That's pretty damning to me. I would be willing to bet that 81% of porn sites are not scams. So putting crypto as a higher risk category seems correct to me.

(I also recognize that there's legit exchanges, especially outside of the world of ICOs, but crypto seems to have a massive fraud issue now.)

The correct point of comparison is probably gambling, since that’s the outcome most people expect from cryptocurrency.

> crypto purchases are starting to be placed in the same risk category as porn

> crypto is being put in a HIGHER risk category than porn

Most banks won't let you open up a merchant account for your porn site, but they typically won't block purchases from said sites.

Why is it depressing?

What is the % of people that bought smokes, alcohol and other harmful substances.... and could not pay back?

What about the % of people that bought iPhones on credit and could not pay it back?

The number needs to be taken as a comparison to other purchases (it is Credit after all) to see whether it is higher or lower than the typical credit card purchase.

At least with crypto (or any forex) you have purchasing power vs. Buying over priced meals, useless gadgets and drugs such as coffee, wine or cigarettes

If people who bought soda had a 22% default rate, Wells Fargo would ban soda purchases. They don’t care about blockchains, they care about carried balance interest and non-defaulted balances.

Are there any other historical instances of banks banning a specific type of purchase from CCs?

Casino chips, online gambling of just about any kind, stocks, money orders, lottery tickets, and mortgage payments all basically can't be made with credit cards.

There are some banks that have blocked pornography and medical marijuana purchases.

But basically, the pattern is clear: banks don't want to lend you money to make investments. Banning money orders is a natural extension of that because you can then go use that cash for the aforementioned things.

That makes a lot of sense, because if banks did want to make those investments, they don't need you. If a bank wants to invest in stocks, property, or a game of roulette, they can just go put their money there, no credit card customer required.

What banks can’t do without lending you money is get a little slice of your paycheck every month through interest payments. This is a separate asset class than things like stocks.

But don't banks want you to be in debt to them, paying 24.9% annual interest? Isn't this how banks make much of their money? Why would they care how you enslave yourself to them? Anyways, even if cash advances have been outlawed since I last did it freely and recklessly (been over 15 years, so maybe they have?), it doesn't take a genius to figure out how to get cash somehow or the other.

As a proof of concept, the very first coin dealer I just found randomly using Google takes all major credit cards and sells silver by the ounce. Well, gee whiz, I can run up my cards buying silver ounces, walk down the street, sell them at a different coin shop for cash, then go buy whatever I want. Hmmm... What is the real reason banks don't want people making certain investments??

Of course banks want that interest, but if the customer defaults they incur a big loss, so they also need to manage their risk.

With regards to cash advances, they come with much higher APR rates, to account for the increased risk and are often not available to card holders with low credit.

Perhaps Wells Fargo would be more amenable to their customers buying crypto if they were able to charge a higher APR for such transactions, but I imagine this isn’t such a simple change given the many parties and agreements involved.

As others have pointed out, the other aspect is fraud. Perhaps the anonymous nature of crypto currencies attracts more fraud payments than bullion?

However, I am highly skepticle that you can buy silver with a credit card and then sell it for cash “down the street” without incurring huge transaction costs in the process. I’d be surprised if the process was even 80% efficient.

If you are in a dense coin/jewelry district of a medium-sized city, you can get darn close to the posted spot prices for mainstream coins. They will charge a bit extra but probably closer to a 5-10% rake than 20%.

Source: I once negotiated a cash price for a jewelry piece in downtown Portland, Oregon and the jeweler accepted bullion I wanted to liquidate at quoted spot bid in lieu of cash for part of the price.

If you are talking about getting "SAR levels" of USD folding green, though, you're going to need to make an appointment in advance. Plus, heavy. So the "walk 1600 oz of silver down the street" strategy has a number of practical impediments beyond the spread.

If you are buying 1600 oz. of silver, why not just buy 21 ounces of gold instead? lighter! But honestly I doubt too many people even have limits that high on their cards.

Anyways, as an American who's grandfather landed on Normandy in WWII and who actually has roots back to the Mayflower (I do!) the very idea of an "SAR level" makes me fricking sick. Disgusted. People should be free to do what they want with their money and not have to tell anyone anything, period. Not only with their money, either..with their free time, the communications, their travels, their bodies and souls...LIBERTY should not just be an empty slogan on cheap metal coins and in songs and engraved on old stone statues.

It is really too bad what the USA has become, and I hope that the future will see a brighter day for "we the people"..

Silver and gold "rounds" (as they are called) minted by South Africa (Krugerrands), USA (Eagles), Canada (Maple Leafs), Australia, New Zealand, and so on are nearly as liquid as $100 bills, and you'd probably only lose at most 5% . 90% silver US coins minted before 1964, as well as very common date and poor condition US gold coins also are easily bought and sold fairly close to spot.

(Edit, adding: I just did a quick peek around the web and found spreads as low as 0.6%, if you buy and sell with that same particular company. In fact they also will hold it for you so you don't even have to physical take possession and deal with mailing or transporting it at all. While I would expect they may have some rules about that, it does show how competitive the market is and gives some idea of the situation.)

If you buy gold and resell it whereever then you have cash. The casinos in Vegas don't ask a lot of questions, nor does anyone else, really...(yes, this includes the good ol' Moonlite Bunny Ranch too..lol)

All I'm saying is that you can easily get cash from credit cards which you can then buy whatever with, so I just don't see the point (well, I may...) of them limiting your usage of their cards.

Because if you default, or go bankrupt, they lose out the interest payments and the debt owed back. Its all about risk management.

Also, interest rates are much higher for cash advances, belying their higher risk profile.

Honestly, the responses in this thread from bitcoin people...it’s like they’re just now realizing that banks have intelligent employees working for them.

Ding ding ding!

Here's a random credit card from American Express. Cash advances have a drastically higher interest rate, PLUS a 3% (minimum $5) transaction fee.


Same pattern for Chase Sapphire Preferred. Higher APR and this time a 5% (minimum $10) transaction fee.


They want people to get in debt and then make payments, not get in debt and then default.

> Hmmm... What is the real reason banks don't want people making certain investments??

If you're suggesting some kind of conspiracy against cryptocurrencies by banks, you should provide some evidence to counter the entirely reasonable justification about the high default rate the article has given.

I never used the word "conspiracy" but don't you think the Federal Reserve and other central bankers are at least talking about it, making some contigency plans, ..next step is what is sometimes called in shadier parts of society as "calling in markers" ...you cannot deny that Wells was one of the banks bailed out in '08 so...umm...

It's interesting, the other day at a local gas station (AZ) I just saw a sign posted that they now accept debit and credit cards for purchasing lottery tickets. I wonder what recently changed?

I think this is probably a case of the individual retailer accepting credit cards, but that doesn't mean your credit card's issuing bank is going to approve the purchase.

Obviously if they accept them, there must be some banks that don't mind, but I know that many issuers won't accept the transaction. Kind of like the situation we have here: Wells Fargo blocks cryptocurrency purchases, but not every bank does.

Presumably they list the purchase as "misc retail" or something equally nonspecific, and the bank can't tell whether that's gas, groceries, lottery tickets, or all of the above. (Hint: it's probably all of the above.)

Also, when you use your credit card to get a cash advance, it is charged at a higher interest rate. Letting you buy cash-like things would let you circumvent that higher interest rate, but since they usually ban those things, the loophole is closed.

As far as I know, the only bank that fully bans mortgage payments is American Express, I've use my Citi card to pay my mortgage when Plastiq has discounted fees from time to time.

Interesting. I thought Visa also didn't allow it accept with debit cards, but now I am not sure. A little googl-ing suggests the main reason people can't may have more do with the mortgage lenders than the credit cards.

You're right, apparently Plastiq reached out to a blogger and made the following statement: “mortgage payments are not an allowable category on Visa cards.”

My Citi is a MasterCard and I've never had problems paying my mortgage with it. I did just last month. So Visa and AMEX won't let you pay mortgages but MasterCard is ok with it.

Yes, AMEX prohibits the following:

-Adult Entertainment

-Cash Advances

-Check Cashing/Guarantee

-Child Pornography

-Condo (Real Estate) Down Payments

-Door-to-door Sales

-Credit Restoration Services

-Escort Services and Non-Licensed Massage Parlors

-Financial Services

-Foreign Exchange Bureaus

-Future Services


-Lottery Sales

-Marijuana Dispensaries

-Mortgage Payments

-Multi-level Pyramid Sales

-Payday Lenders



-Travel Tour Operators

-Unlawful Sale of Prescription Drugs

-Unlawful Sale of Tobacco and Smokeless Tobacco

-Unregulated Charities

-Virtual Currency

Section 10.2 Prohibited Merchants: https://icm.aexp-static.com/Internet/NGMS/US_en/Images/Merch...

(I believe they are some of the most conservative with transaction risks among the Big Four credit processors in the US)

Villagecoin.com takes AMEX and they sell all manner of very liquid investment type stuff, like silver and gold ounces (they are even claiming to be an "Authorized U.S. Mint Gold and Silver Dealer" by golly). So there's your out. I guess AMEX didn't think of that. Hmmm.

If you need cash to pay the bill and/or Amex sues you, liquidity is a positive. Liquidity means those assets can be easily converted to cash so that Amex gets paid.

Liquidity isn't the problem; price stability is. And gold and silver are not generally problematic as far as price stability goes. The gold and silver can be liquidated for something close enough to the original purchase price that Amex doesn't seem to care.

Do you know of even a single case of a credit card company actually (not just threatening) suing a regular person? Just curious, but I think for 99% of people's credit limits it would be a -EV (poker term for "negative expected value") move on their part, especially since if the customer lost, he can just declare bankruptcy anyways, after perhaps burying a little nest egg out in the Mojave or in a child's name or whathaveyou.

>Do you know of even a single case of a credit card company actually (not just threatening) suing a regular person?

Um, yes. Years ago a previous tenant of the place I was renting got served in a lawsuit from a credit card company. They apparently didn't have the current address for the person so the papers were left at my house several times. It wasn't that much either, less than $2,000 IIRC. I called the lawyer and let them know they were serving the wrong house.

Anyways, if they sell the debt to collections the collections agency can (and does) sue the consumer.

A family member of mine was also sued by a hospital (not collections) for unpaid hospital bills less than $1,000.

Anyway, if AMEX doesn't disallow precious metals then, for whatever reason, they must not have a high fraud/chargeback rate or they don't have a high default rate for those transactions. It's business.

Also, buying something and reselling it for a profit is a totally valid use case for a credit card, they can't meaningfully prohibit that, nor would they want to, since that includes pretty much the entire category of "business expenses."

American Express is a business and they know the type of activities that make them money and the kinds of activities that don't make them money. They wish to participate in the former and avoid the latter. If you're upset about businesses avoiding activities that lose them money, you're going to be upset all the time.

How many "years ago" are we talking about here? The 1950s? You know how much corporate-type legal teams bill per hour, right? Several hundred dollars per hour. And there are filing fees, marshal fees for the serving, and probably all manner of paperwork that piles up that someone has to deal with, yet more expense.

I have been served myself, by the way. They do not leave papers at a house. Legally serving someone means the papers must be given directly to the person, and if that person refuses to take them, left at their feet (literally). That is the definition.

The hospital situation might have been a small town hospital using Small Claims court or something, but even still, the expenses involved would not make it worthwhile for a lousy grand.

I'm not trying to call you a liar or anything, astura, but you are either talking about a very long time ago, or you are somehow mistaken about the nature of these events. And as far as "serving" goes, I don't think that has changed pretty much forever.

Who's upset, anyways? I don't care what businesses do. If Wells (the article wasn't about AMEX, by the way) doesn't want peoples business, screw 'em. I'm sure someone out there will happily give credit to people with the right job and other credentials.

Credit card companies mint money, as do most banks. They rarely lose or go out of business, do they? That's why I'm so suspicious about their motivation here. They happily loan money to college kids (who buy mostly beer, junk food, and spring break flights to Cancun with it), they happily let people use their cards at liquor stores, and the majority allow for cash advances (note that their are always ATM machines in casinos and strip clubs and bars and nightclubs, too). You don't think this is just a little bit weird, huh?

Eh, good call. Sued is probably extremely rare / non-existent. I'm assuming their modus operandi is to register as a creditor on bankruptcies and try to claw back what they can that way. End result is still the same: They're not worried about gold and silver because they are very price stable and easily liquidated during bankruptcy in order to pay creditors.

If only there were a way for normal people to call the number on the back of their Amex and report it to the fraud division!

> Child Pornography

I wonder how they manage this. Is there a database of known child pornography vendors who accept credit cards? Seems like an odd thing to specifically call out.

The description for that reads "Any written or visual depiction of a minor engaged in obscene or sexually explicit conduct."

I don't know of the specific laws, but that leaves open content that may be legal (books, comics, drawings, fanfiction).

By the way, "Travel Tour Operators" doesn't include all travel tour operators, just rouge ones: "Travel Tour Operators without membership to a Travel Industry Bonding Agency or not an authorized ticket agent (e.g. ARC/IATA/ABTA)."

Also "Adult Entertainment" only applies to Internet porn, "Internet adult digital content sites," so you can probably still use your AMEX to buy a DVD at a brick and mortar porn store.

Might be aimed at international vendors that are legal in their jurisdictions, but would be classified as CP in the US.

See "Studio Seventeen" of Netherlands.

"Travel Tour Operators" surly they don't mean you cannot buy a holiday using a cc ?

Read the description for "Travel Tour Operators," it doesn't include all travel tour operators, just rouge ones: "Travel Tour Operators without membership to a Travel Industry Bonding Agency or not an authorized ticket agent (e.g. ARC/IATA/ABTA)."

I used to play a specific MMO which had to completely change its gameplay because scammers in the community were using stolen cards to buy bulk game subscriptions, lead to chargebacks and credit cards threatening to ban their primary means of monetization.

Mutual funds / stocks / index funds.

Cash-equivalent gift cards.

On the surface, this looks bad. But, the underlying logic - that Wells Fargo doesn't want to loan you money so that you can buy money - seems reasonable to me. If you have cash in a Wells Fargo checking account, you can still buy cryptocurrency with it.

IMO it's less about the people borrowing money and more about the potential fraud.

I think you are correct. After all, many credit cards have a cash advance feature that will allow you to borrow money to get money.

Similar restrictions are commonplace for things like money orders, western union, and prepaid credit cards.

In fact citi is posting some of the transactions as cash advances.

Just as an illustration, the fraud risk is so bad that someone as smart as Steve Wozniak had bitcoins stolen via simple fraud.


just because Wozniak is a good programmers, doesn't mean he automatically knows how to secure cryptocurrency. a fairer comparison would be if a cybersecurity expert's coins got stolen.

I'm sure Woz has a better idea of how to secure stuff on computers than 99.9% of people. If you need to be a cyber security expert to not run a significant risk of being defrauded, then it's obviously something credit card companies shouldn't be considering acceptable risk

By that logic they should ban gift cards and in-game currency too.

Sure, you can use your checking account, but if my credit card is going to restrict my usage and I'm going to be hassled into circumventing it, then why even have it?

I actually have a Well Fargo credit card, I'll be keeping an close eye on these restrictions.

>By that logic they should ban gift cards and in-game currency too.

Except that it doesn't because people aren't buying $10,000+ in gift cards on the hope that they will increase in value and then defaulting on their CC payments because said gift cards crashed.

When trying to solve a problem you have to focus on the actual problem at hand, not philosophical musings.

But they might buy $10k in gift cards and then refuse to pay their credit cards, and yet still have gift cards out that they can use later.

Thinking about it that way, I'm surprised there isn't some kind of limits on gift card buying. (Or maybe there is, and I haven't read my agreement well enough.)

A store can cancel gift cards when a chargeback occurs.

It's much harder for a cryptocurrency exchange to reverse a transaction.

They probably look at the data and not many people do what you suggest.

There is, mostly on the merchant side and generally only with cash-equivalent gift cards.

Buy enough of those and your bank is likely to shut you down. FlyerTalk is full of threads about this. There used to be a number of easy ways to buy Visa gift cards and then cash them out to your bank account. You could send a couple thousand bucks in a circle earning points off each purchase.

I imagine this is not a real problem, which is why they haven't addressed it (or, they have, and you just aren't aware.)

Gift card companies have their own risk management, and are perfectly willing to deny purchases that look like that

The difference is a percentage of people purposely buy more cryptocurrency than they can afford expressly because they think they will be able to sell it for more than they paid before the bill is due. Essentially the house flipping craze of the mid 2000s, but with credit cards and cryptocurrencies.

No one thinks a $100 Best Buy card will be worth more than $100 in the future, so people don't load up on them looking to make a buck.

> No one thinks a $100 Best Buy card will be worth more than $100 in the future

In fact, you know it will be worth less!

Store gift cards are really just store credit and can't really be used anywhere else, I've yet to encounter a store that will readily convert store credit/gift cards into cash.

There is only one place I know of where you can buy cash like gift cards in significant amounts, and many cc companies do post it as a cash advance (with the associated interest and fees). Everywhere else that you can buy visa/mc/amex gift cards the denomination is usually maxed at $500 and the store won't let you do too much, but there is a healthy cottage industry leveraging that (both legit and fraudulent).

In-game currency is really just store credit. It cannot be easily converted to cash and is thus not really considered a loan.

Selling either in-game currency (where possible) or store gift cards usually requires giving up as much as 20% of the value and thus isn't seen as a viable option.

CC companies don't want you to view them as a cash funding source, they want to be directly between the customer and the store not the customer and his/her cash. Especially cards with high "cash back" returns.

> By that logic they should ban gift cards and in-game currency too.

When you buy a $10,000 TV on a credit card, and can't make your payments, you're an idiot. There are a lot of idiots, but very few of them will do impulse purchases like that - because they understand that next month, they'll have to pay for it.

When you invest $10,000 of money that you pulled from a credit card... People feel completely different about that. If you have confidence in your investment, why not borrow money to fund it? You'll make that money back, and pay the debt off! If you don't have confidence in your investment, you wouldn't be investing anyways, with your own dollars, or borrowed ones.

Investing self-selects people who are (unreasonably) confident in the return rate on their investments. This is why you can't buy stocks or bitcoin on a credit card, but you can buy Magic: The Gathering cards.

You get shut down if you buy too many gift cards. See FlyerTalk, Reddit, credit card blogs, etc., for examples.

Your credit card always has restricted usage. You probably can't use it for gambling, buying stocks, or to pay for a call girl either. If you have an American Express you can't use it for internet porn or to buy your LuLaRoe "inventory."

Gift cards and in game currency aren’t a loan. Your lender reserves the right to constantly evaluate your credit worthiness and restrict access to that credit at their discretion (and speculating on a commodity with unsecured credit is risky af).

When you say “why even have it”, the answer to your rhetorical question is “it’s still a useful, and some might say necessary, financial tool”.

Disclaimer: I work in risk management, but not at Wells.

When you provided a credit line from a lender, your credit worthiness has already been evaluated - hence, being granted the credit line. Why should the lender being involved in deciding what you spend that credit on, provided it wasn't a part of the original contract (eg. a car loan), and you continue to make your payments?

It was part of the original contract. A credit card isn't a completely unrestricted line of credit. You either need to use it in transactions with merchants that they have a payment processing arrangement with or use it for a cash advance that comes with extra fees to offset their increased risk.

Because risk is a time function, not static. If credit providers approved credit at one point and time and never reviewed or limited it, they would be exposing themselves. Your example (car loans) have time limits and contracts that account for risks in the time limit - the longer the time limit, the more potential risk. Credit on the other hand is ongoing.

Those are actual items.

This is more similar to buying pre-paid credit cards or a money order with a credit card. It has been 5 years since I worked retail, however most places didn't allow that. Debit cars were fine because they were cash backed, and the bank (and everyone else involved) had a bit less fraud and things to deal with.

These sorts of restrictions are nothing new. Though this restriction might be limited to Wells Fargo right now, I'd not be surprised if this becomes standard much like the examples I listed above.

"By that logic they should ban gift cards and in-game currency too."

No, because there's this thing called "context", which is notthe same in those situations.

That's the point. They don't want to book your action.

Ya, the problem is that it's not "currency". The problem is that it's highly volatile speculative investments.

>By that logic they should ban gift cards and in-game currency too.

...those aren't money.

Neither is crypto-currency. At this point, it's more like gold, which no one treats as "money".

Yet gold is a real thing which has real value and can be repossessed by creditors. Crypto is less like gold than futures trading.

I have a hard time saying crypto isn’t real because if I say that then I’m also suggesting that information isn’t real.. But, to some mathematicians and philosophers, etc, everything that is real is information. And some information can become more valuable than others. So I’d say that crypto currency is real. The information just exists in a digital form, which in practice is represented by the particular arrangement of physical matter, whether that’s the arrangement of ink on paper or bumps on a disk.

Last winter whoever held the information of 1BTC held the equivalent to 20,000 real tangible USD’s that they could take to the bank, exchange for food, etc. Today that same kind of information isn’t as valuable in the marketplace, but it’s still as “real” as anything once we get past the misconception that all things real must exist in one physical form.

TLDR; Is it real? Absolutely. Is it valuable? Right now it is.

Gold is "real" because the intrinsic qualities that underpin the value of gold are constant and inherent to its chemical composition. Conversely, the qualities that underpin the value of blockchain tokens are an emergent property of a complicated and expensive technical system that sits on top of an even more complex system (the internet) that is dependent on a functioning electrical grid (a brittle dependency in many places) all of which requires active maintenance at every level.

If you lock a nugget of gold away for 5000 years in an unbreachable time capsule, it will still be a pliable and lustrous metal when you dig up, if you do the same thing with a wallet private key, you can't even be sure if the token's network exists much less all the infrastructure that it depends on to even exist.

I think you're confusing whether or not something is 'real' with whether or not something will hold value in 5,000 years.

If you're able to ascertain a wallet private key 5,000 years from now, it'll still be as 'real' as it is at this moment. Just maybe not as useful/functional or valuable.

Well... unless in 5,000 years there is a crypto museum out there willing to pay significant sums for anyone who can produce a valid private key for an address that once had a transaction on the blockchain.

Can you buy [bulk] gold with a credit card?

It's a lot less volatile and prone to "disappearing" in a hack.

You can in the UK both bar and coin (which is more tax effective)

Pretty sure they don't allow you to buy Forex or investment funds or a mortgage on the credit card either.

Banks are doing this from a perspective of risk management. But I will bet any number of Bitcoin that crypto nerds will construe this as a narrative that the big banks are attacking them once again.

There are multiple potential explanations. I think disallowing commerce without an agreeable substitute, like immediately transferring or escrowing money from other accounts, is an unacceptable inconvenience. Often times, a person wants the protection of a credit card, while having sufficient assets to purchase in cash or repay the card corp. If anything, that a debit card lacks similar protections of a credit card is absurd and inconvenient per skimming and missing fringe benefits like travel insurance.

Debit and credit are the only methods for commerce with almost any third party. Transferring and escrow payments require direct channels that Wells Fargo does not want to negotiate. Regardless of differences between debit and credit, debit is at least backed by direct account balances. Credit is not. Chargebacks would also be a nightmare for credit cards.

Even if it's deemed unacceptable to disallow over-risked services like credit cards to purchase cryptocurrency, then the beauty is that cryptocurrency purchasers can migrate their loans, and savings to another banking provider who will service the headache of credit-backed cryptocurrency investments.

Banks are in the business of risk management. They apply that to money, but ultimately, they are all about that risk.

For those of you who are worried this is a value judgement, just remember that banks are in the risk management business. They generally allow any transaction until they start seeing risk in it through their own data.

What this tells me is that there have probably been a lot of chargebacks related to cryptocurrency as the coins have fallen and people are trying to make up their loss by putting on "the evil bank".

I would actually give props to Wells for being the last major bank to ban it.

USAA just did this a few weeks ago. My knee-jerk response was to be upset, but then I read the arguments regarding creditors retaining the right to determine what is purchased with said credit, as well as the implications for whether cryptocurrency would be considered a cash advance.

Cryptocurrency definitely needs to be a cash advance, otherwise you can abuse % cash back and other benefits with it (reddit.com/r/churning). I don't think it's been possible to do it for a while though.

But TBH they probably do it because cash advance has a higher APR.

Off-topic, but I find churning at least as ethical as banks promoting the accumulation of debt with paltry benefits/kickback to consumers for earning Visa/MC money with transaction fees.

Abuse is the credit system and its marketing writ large.

Cash advance higher APR is to mitigate the extra risk of people using debt to pay for debt and the increased risk of default. The bank isn't losing money on the cashback feature of a credit card. They are splitting the interchange with the customer. The vendor/merchant is the one paying 2.4% of the transaction.

I'm pretty sure all the credit cards I've had had cash advance at a higher APR and it started accruing immediately, instead of in 30 days. It really only makes sense to use it in an emergency and if you don't have your bank card to use instead.

> But TBH they probably do it because cash advance has a higher APR.

Which seems reasonable to me — if someone is at the point they need to borrow cash from a credit card, they’re probably a higher risk of default.

>Lenders have said they’re worried they’d be left on the hook if a borrower lost money on a digital currency bet and couldn’t repay.

Weird, isn't the whole point of setting a credit limit that you assess how much risk a given person can sustain?

Seems to me like banks want to hand out high credit limits to entire overspending, under the assumption they can make their money back twice - through reposession + obscenely high APRs in the 25%+ range.

Meanwhile, every time I go to a casino ATM I see prominent signage on how to use one's credit card to obtain casino credit. They don't block these transactions, they just factor the existence into the calculations for a credit line...

> they just factor the existence into the calculations for a credit line...

That is very misleading. They "allow" casino transactions in the form of cash advances, not directly to the card as someone might infer from the way you constructed that sentence. The reason this detail is important is because a cash advance can be used to buy blockchain tokens just as easily as it could be used to buy casino tokens, and they're both relegated to the cash advance scenario for the same reasons.

This might be to prevent a cash back loophole. Most banks don’t allow getting cash from a credit account.

The cash back loophole works like this: buy crypto on coinbase with credit card, then immediately sell and transfer to checking account.

Exactly this. Also some bank customers may buy (crypto)cash declare bankrupcy and their crypto assets will be unreachable to any debt collector or law enforcement.

I'm glad that this discussion is peppered with the words "charge back" and "fraud". People speaking out of their element about "banks censoring their competitors" probably haven't been on the receiving side of a frivolous charge back, lost the dispute, and been SOL for it.

Crypto companies could default to push payments and/or micro-deposits for verifying ownership of a fiat instrument, but people want their coins now and that causes friction, which shrinks user activation funnels.

Anyone using a fiat on-ramp to accept payments (including exchanges) has agreements with Visa/Mastercard/AMEX/their bank to keep their charge back ratios under 1%, or else Visa/MC/the bank processing their fiat transactions will fire them (good luck running a business accepting fiat without access to the card networks or a bank).

Bank fraud analysts probably have their own bank-side metrics/reasoning to give customers the benefit of the doubt.

For example, if the fraud analyst sides with a merchant and denies filing a friendly fraud (maliciously filed) dispute, maybe the customer complains to their manager, and takes whatever sympathy-inducing narrative to social media, which would get an analyst fired and make a bank look even less sympathetic.

Through that, it's too easy for someone to maliciously load up on 2+ months of purchases, walk to their bank, state "I've never heard of Bitcoin someone hacked me and bought $6k in crypto I need that back", and win. It's not worth the headache until/unless banks and exchanges bridge the gap and determine a means of:

1. Confirming the exchange isn't providing liquidity to money launderers 2. Confirming with the bank that the KYC info requested sufficiently fulfills #1 3. Confirming with the bank that the KYC and payment instrument info (if fiat) requested sufficiently provides evidence that the owner of the instrument authorized the payment.

I ran into this December 2017 when I went to transfer funds to Coinbase. To be a little fair, coinbase had a series of more than one charge and refund. When I initiated this verification, Wells Fargo alerted me to the activity via text and allowed the transaction to be authorized. To this day, no other transaction on that spending account has ever presented itself in this manner. Due to the disjointed nature and possibly stability issues at the time this process failed hard.

What did work was a wire transfer. This was a $30 fee paid to Wells Fargo and on top of the $10 fee from Coinbase, making it cost $280 to credit my account with $240. Wells Fargo took 3x the fee and the conspiracy theorist in me believes this is their primary motivator for doing this. You can get your money out to do what you want with it, but not without a steeper penalty than the exchange. Now that this stance is official and if I hadn't lost money (to take a simple view, that $240 is now worth around $75) I'd be looking to open another account somewhere that doesn't try to tell me how to use my money. When I realize this other account at whatever mythical bank is somehow superior in every way, I would ditch them completely. It doesn't seem like the greatest move on their part but they could also be counting on the fact that I may never do this because of the hassle involved with changing everything over.

Many (most?) banks charge an outgoing wire fee. That $30 fee is probably the same whether you’re trying to wire $250 or $250,000, and is probably unrelated to _where_ you’re wiring the money to.

The banks shouldn't be allowed to promulgate an electronic economy based on credit cards that they massively profit from and then turn around and arbitrarily rescind the credit they have put out to use.

If they want to mitigate their risk they should bring debit cards up to the same level of fraud protection that credit cards enjoy. Instead we get the Zelle shitshow that only a fool would use.

To all people who think this is about 'risk management some questions to ponder:

- how is buying a currency like the Bolivar allowed (50,000% plus inflation)

- coinbase limits purchases to about $100/USD per week...how much risk is really being exposed?

- why is buying depreciating liabilities such as computers, software, harmful drugs (smokes, alcohol, coffee) and overpriced meals and fashion accessories acceptable? (Doesn't alcohol hinder purchasers health and make it harder to pay back due to death and other problems?)

-Where was their "risk management" when they socialized their bets in the 2008 crash?

- why do they keep extending lines of credit to the USA gov for the purchase and sales of billions of dollars of yearly foreign arms sales?

Now, considering that bitcoin is MEANT to replace banks as its modulus operandi and enable p2p transactions (ie: cutting out middlemen - banks!).... it becomes apparent what they are really doing: trying to stop the leviathon and holding onto their business model.

Observe their actions, not their words and then their intentions will become clear.

So the argument from the bank here involves 1) customers defaulting on loans and 2) disputes + chargebacks

Question, I might default on my purchase of diapers for my baby. Someone might also fraudulently purchase diapers for their baby using my credit card.

Should these purchases be banned by cc companies as well?

No, because it doesn't happen in nearly the same rates.

Ok, so what you're saying then is that a bank should be allowed to discriminate based on our purchases, and that if we don't like it, either use debit or cash, which come with some flaws/inconveniences.

How about instead of allowing to discriminate based on purchases, they just accept slightly smaller margins?

At best, this thread seems to reveal a disconnect between consumer expectations and the mindset of banks issuing credit cards. That is, I am reading that some consumers of credit cards feel entitled to spend however they so wish on their cards so long as they can pay it back, whereas the reality is banks view credit cards as a product with which they may attach terms of service like any other product. Without aligning these two factors, people that are actually spending someone else's money will feel wronged when they are not allowed to, without also keeping in mind that banks these days being huge integrated conglomerates DO offer credit for investing in the form of other credit products.

I'm sure you can't buy stocks with credit cards either.

There are so many problems with mixing credit cards and crypto-currencies. Many entire companies in the space have been killed or forced to pivot drastically because of it.

It comes down to the question what kind of financial services they want to provide.

What people are doing is to use those cards as speculation devices. You enter a game of speculation, using your card depth as speculation matter against the crypto currency. It's simple currency speculation, nothing new, nothing special.

But, is this what Wells Fargo wants to enable / service with the specific product "credit card"?

It's a matter of product line-up hygiene on the side of Wells Fargo.

Keep in mind that debit cards can still be used to purchase crypto. I see a lot of potential for blockchain tech in the long term but I think people should not be looking at crypto holdings as an investment strategy. This seems like a reasonable move by WF to me. They only want you to use money that you actually have to engage in high-risk investments. Otherwise, they stand to lose a lot when their customers can't cover their balances.

My guess is that the friendly fraud rate in crypto is way way too high. People really like to abuse this.

The righteousness of the decision notwithstanding, this doesn't really seem like the time for Wells Fargo to exercise large-bank leverage by instituting new rules. I'd let the rest of the industry go first here (granted some have).

Buying other instruments with your card has been against the terms for awhile on most cards, IIRC. I was surprised credit card companies allowed the purchase of cryptocurrency in the first place.

My first reaction was: why do they mess with what people do with their money. Then I remembered that the way credit cards are used in a lot of places is not actually the money of the account holder.

Where I live, debit cards are the standard, and credit is rarely used, rarely accepted, and rarely something you can endlessly lend with. SO when I read "Bank X wants to mess with transactions Y" in my context it's like someone telling you what you can do with your money, but since it's credit, not debit, it's the bank's money and it's pretty reasonable that they get to say what you can use it on.

In the US if you have your finances in order there is 0 reason not to use a credit card on everything (where you aren't charged extra to do so) as most credit cards offer a rewards system. For example I have a card that rewards 1.5% back on every purchase and I have it setup to pay in full at the end of every month. Doing this allows me to never pay interest but basically get a 1.5% discount on every purchase.

Finances in order and have the willpower not to spend money you don't have, just because you can. Some people lack that, and it's smarter for them to just avoid the constant temptation by now having a credit card.

When people say to use a credit card to buy everything they typically mean using it in pace of your debit card: only spending money you actually have right now and could pay off instantly and never carrying a balance. You're in it to rake in fraud protection, rewards, and a higher credit score for if/when you want to buy a house or car.

You don't even think about the idea that there's a line of credit attached to the card that extends longer than 30 days.

Chase lets you configure the payments to pay in full every month. I was very surprised to see this, as the bank ideally wants you to pay the minimum and interest.

Also one thing people often forget if carrying a balance - if you have balances with two different interest rates (say cash advances or balance transfers first vs. purchases or if the card issuer has raised the interest rate for purchases after a certain date) they would like you to think that "any payment above the minimum goes towards the highest interest balance" means that the whole of the given payment goes towards said balance. In point of fact, only the amount of the payment above the minimum does, the rest goes to the lower interest balance. This can sneak up on people who don't actually read their statements and destroy any form of credit progress.

And it's awesome. I haven't missed a credit card payment since I switched to a Chase card.

Previously, in a decade or 2, I think I missed 2-3 payments due to mistakes on my part. Not horrible, but certainly embarrassing and wasteful.

IMHO if you haven't conquered the willpower part, you don't have your finances in order by definition.

Is there a secured card with cash back? Seems like a good option for such people.

Charge cards offer great cash back but are not "secured."

You can absolutely spend money you do not have, but only for one month, and then your account is closed and probably hit with massive fees.

Discover has a secured card that earns cash back.

Because credit cards are different than debit cards - the bank is exposed on the money they lend in the CC transactions. If there is fraudulent activity associated with certain transactions and it's costing the bank, they're going to make the business decision to ban it. They're not limiting their customers debit cards purchases.

>Where I live, debit cards are the standard

In America debit transactions are treated differently. Since the money is deducted immediately, if there is fraud you could see your rent money tied up for 30-60 days.

Thus it is prudent to pay for everything with credit cards.

I actually take it a step further and have two checking accounts - one that my paycheck goes in, and one that I keep a couple thousand in specifically to withdraw at ATMs. That way if there is fraud, I've only lost a small bit of money and my bills will be able to be paid.

I don't blame them. Cryptocurrency offers fast finality while credit cards offer chargebacks up to 90 days. Those two things don't mix well.

Of course for a mere 6% one time processing fee Wells Fargo will offer to sell you BTC from your bank account.

Didn't Wells Fargo get in trouble a couple of years ago for laundering money for Mexican drug cartels?

No, that was HSBC.

This is a problem, a large one.

What prevents wells from saying "I don't want to pay for your wedding because you might get divorced?" What prevents them from saying "no you can't have a cash advance in country XXX because the exchange rate is volatile?"

There is an established remedy for this and it is by removing the ability for exchanges to process cards. Or process them as cash advances.

The first: Irrelevant, the money's going to be gone regardless. This is the type of purchase you have credit cards. The second: That's actually a thing. Cash advances aren't guaranteed to be available, they're charged at a higher rate, and mine can only be used to get CAD or USD, not anything else.

You already can't buy stocks, bonds, or options with a Wells credit card. This is putting crypto in the same bucket as other securities.

You can't trade forex either, but those are all considered securities. That would be illegal.

BTC isn't considered a security - https://coincenter.org/link/sec-chairman-clayton-bitcoin-is-...

No matter how you slice it this is the card provider making an arbitrary call, one that should be made at the processor level.

Further down someone points out a bank banned the purchase of guns. Let me be clear that I have no love of americas relationship with firearms. But to decide that a CC can't be used to make an otherwise legal purchase is the beginning of a bad thing. As we become more cashless banks need to be more neutral in their dealings.

If your argument is that bitcoin is not a security because it's a currency and that it continues to fall under SEC virtual currency guidelines, then wouldn't buying bitcoin be a forex transaction?

We can not class bitcoin as a security:

A security is: "a thing deposited or pledged as a guarantee of the fulfillment of an undertaking or the repayment of a loan, to be forfeited in case of default."

Bitcoin is an entity unto itself I can buy bitcoin and trade that DIRECTLY for goods - something that is impossible with securities. If bearer bonds were still a thing there might be some argument around directly transferable securities but that is no longer the case.

If I buy on forex (in pips) I can not trade those to a merchant directly for anything - bitcoin can be purchased at an exchange (not a market but an exchange) and used to acquire goods directly.

Lets look at the justification that the article gives:

"A study conducted by LendEDU last year found that roughly 18 percent of Bitcoin investors used a credit card to fund the purchases. Of those, 22 percent couldn’t pay off their balance after buying the digital coin."

What percentage of people can't pay their CC after a cash advance in a foreign country? How about after making a comparable major purchase. If we take those facets into account that %22 probably isn't far outside the industry average.

There were lots of paths Wells (or the other banks listed) could have taken - this was not a good policy on the merits of what they are saying.

There is a large push to get credit card companies to ban firearm purchases, and Citigroup dropped merchants selling them IIRC.

Comparing cryptocurrency to marriage and traveling to foreign countries.

I'll take "false equivalencies" for $500, Alex.


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