The wave of banks banning the purchase of cryptocurrency using their credit cards is growing, with Wells Fargo now joining this type of ban. 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 crypto.
It seems that debit cards can still be used to buy cryptocurrency (check with your bank to be sure of their policy), but the use of credit cards to buy cryptocurrency has turned around with these banks leading the way with these bans on purchase, and it probably won’t be long before this ban becomes standard.
Seemingly overnight, purchases started to reverse when credit cards were used to buy crypto, and people who had never had a problem before buying crypto with their credit cards began to notice that they were no longer allowed to these purchases. The volatility of the cryptocurrency market is the culprit here, and banks don’t want people to spend a lot of money that will turn out to be difficult to pay back if a major cryptocurrency crash happens, as it did at the beginning of the year.
Of course, these banks will also miss out on the money that can be made when people buy cryptocurrency and the market goes up, but they’ve clearly decided that the bad outweighs the good when it comes to this gamble with their credit cards. This also protects the consumer as it limits their ability to get into financial trouble by using credit to buy something that could leave them cash and credit poor.
Most investors who used credit cards for cryptocurrency purchases were probably looking for short-term gains and had no plans to stick around for the long term. They were hoping to get in and out quickly, then pay off the credit cards before the high interest rate hit. But with the constant volatility of the cryptocurrency market, many who had bought with this plan in mind found themselves losing a huge amount of assets as the market went down. Now they are paying interest on the lost money, and that is never a good thing. This, of course, was bad news for banks and caused the current and growing trend of banning crypto purchases with credit cards.
The lesson here is that you should never max out a line of credit to invest in crypto, and only use a percentage of your hard assets to make crypto purchases. These funds should be funds that you can lock in for a long time without hurting your budget.
So, don’t get caught putting money into a cryptocurrency you’ll need soon, only to find that the downturn has taken the money out of your pocket. There’s an old saying that goes, “Don’t gamble with money you can’t afford to lose,” and that’s the lesson banks want people to learn as they venture into this new investment frontier.