U.K. and U.S. Banks Ban Credit Card Purchases of Cryptocurrencies
In November, consumers began googling whether they could purchase Bitcoin with their credit card, which we declared a terrible idea.
As of this week, banks in the U.K. and United States have answered this question once and for all. In the U.S., Bank of America, Capital One, Citigroup, Discover and JP Morgan Chase have ruled they will decline all cryptocurrency transactions on their credit cards. In Britain, Lloyds Banking and Virgin Money will do the same.
A Lloyds’ spokeswoman told Reuters her bank has banned these purchases to protect consumers, but financial institutions are also trying to protect themselves. If the value of Bitcoin, or any cryptocurrency, crashes, the cardholder may not be able to repay their credit card debt to the bank. Since loan defaults cost banks money, they want to keep their default risk as low as possible.
Bitcoin’s value fluctuates by the hour, which makes it a risky investment. Earlier this week, Bitcoin value dropped to $6,000–after reaching an all-time high of $20,000 in December.
Some banks are still allowing customers to purchase cryptocurrencies with their credit cards. Barclays, which issues cards in the U.S. and is Britain’s leading card issuer, is one of these banks.
“At present UK customers can use both their Barclays debit card and Barclaycard credit card to purchase cryptocurrency legitimately,” a Barclays spokeswoman said.
However, the bank’s stance could change at any time. The same spokeswoman said, “We constantly review our protections for customers as a responsible bank and lender, and are keeping this matter under close review.”
Banks will still allow consumers to purchase cryptocurrencies with their debit cards.