Wells Fargo has now joined the wave of banks that have prohibited customers from using their credit cards to buy cryptocurrencies, expanding the number of banks that have done so. The purchase of cryptocurrencies is being restricted by a number of other banks, including Chase, Bank of America, Citigroup, and more.
Debit cards, it appears, can still be used to buy cryptocurrency (consult your bank for details on their policy), but the use of credit cards to buy cryptocurrency has changed as a result of these banks setting the standard with these purchase restrictions. It is likely only a matter of time before this restriction becomes the norm.
When credit cards were used to buy cryptocurrency, seemingly overnight purchases started getting cancelled, and people who had never had any issues buying cryptocurrency with their credit cards started noticing that they were no longer able to do so. Banks don’t want people to spend a lot of money that will be difficult to repay if a major cryptocurrency downturn occurs, as it did at the start of the year, and this is caused by market volatility in cryptocurrencies.
Naturally, these banks will also lose out on the profits that could be made if consumers use their credit cards to buy cryptocurrency and the market recovers, but they appear to have made the judgment that the risks outweigh the benefits in this credit card gamble. Additionally, it safeguards the buyer by preventing them from spending money they don’t have and ruining their credit by using credit to purchase items.
The majority of buyers of cryptocurrencies with credit cards were likely looking for quick profits and had no intention of staying in the market for the long term. In order to avoid paying the high interest rates on the credit cards, they had hoped to enter and exit the situation quickly. But due to the ongoing volatility of the cryptocurrency market, many people who had purchased with this plan in mind found themselves losing a significant amount of assets when the market fell. They are currently making interest payments on lost funds, which is never a good thing. Naturally, this was bad news for the banks, and as a result, credit card purchases for cryptocurrencies are increasingly being prohibited.
The moral of the story is that you should never use your entire credit limit to buy cryptocurrency, and you should only use a portion of your hard assets. You should be able to lock away these funds for the long term without it negatively impacting your budget.
Don’t risk investing money in cryptocurrencies that you will soon need only to discover that a downturn has drained your account of its value. There is an old saying that goes, “Don’t gamble with money you can’t afford to lose,” and that is the lesson that banks want people to learn as they venture into this new investment frontier.