The wave of banks banning cryptocurrency purchases with their credit cards is growing as Wells Fargo now supports such bans. A number of other banks such as Chase, Bank of America, Citigroup and others are also part of this new trend that restricts the purchase of cryptocurrencies.
It seems that debit cards can still be used to buy crypto (check with your bank to confirm their policy), but the use of credit cards to buy crypto has changed and these banks are leading the way with these purchase bans, and it probably won’t be long time before this ban becomes standard.
It would seem that the overnight purchases started to disappear when credit cards were used to buy crypto, and people who had never had a problem before buying crypto with their credit cards started to notice that they were no longer allowed to make such purchases. Volatility in the cryptocurrency market is the culprit here, and banks don’t want people to spend a lot of money that will be a problem to get back if there is a major cryptocurrency downturn like it did earlier in the year.
Of course, these banks will also lose money to be made when people buy cryptocurrency and the market goes up, but they seem to have decided that the bad outweighs the good when it comes to gambling with their credit cards. It also protects consumers by limiting their ability to get into financial trouble by using credit to buy something, which could leave them cash and credit poor.
Most investors who used credit cards to buy cryptocurrency were probably looking for a short-term gain and didn’t plan to stick around for the long term. They were hoping to get in and out quickly and then pay off their credit cards before the high interest rates started. But due to the constant volatility of the cryptocurrency market, many of those who bought with this plan in mind lost huge amounts of assets as the market went down. Now they are paying interest on the money they lost, which is never a good thing. This, of course, was bad news for banks, and has led to the current and growing trend of banning crypto purchases with credit cards.
The lesson here is that you should never max out your line of credit to invest in crypto, and only use a percentage of your hard assets to buy crypto. These funds should be funds that you can block for the long term without hurting your budget.
So, don’t find yourself investing in a cryptocurrency you’ll need soon, only to find that an economic downturn has taken the money out of your pocket. There’s an old adage that says, “Don’t gamble with money you can’t afford to lose,” and that’s a lesson banks want people to learn as they venture into this new investment frontier.