Cryptocurrency Purchases w/ Credit Cards Now Subject To Fees
A recent announcement by Coinbase stated that credit card companies are now charging fees on cryptocurrency purchases. Some customers received emails from Coinbase on the 1st of Feb. The emails warned them that cryptocurrency purchases are now being dealt as cash advances. Therefore, they will be subject to fees and high interest rates. There were no companies specified by Coinbase, and the company didn’t immediately reply when asked to comment about them.
Information received by a MasterCard spokesman through email, stated:“Over the past few weeks, we have clarified to acquirers the right transaction or merchant category code to use for these transactions (cryptocurrency) so this provides a consistent view of such purchases for both merchants and issuers”.
Voicemail received from a Visa spokesman said: “it would be up to the individual issuer, the financial institution that issued the card, to determine any fees that they might charge for certain types of purchases, so it’s not Visa. We don’t issue cards”.
A post from popular textboard/discussion website Reddit, written by a supposed “major credit card/bank employee” said customers of Visa and MasterCard were already being affected by these new developments.
An email received from Coinbase said “Recently, the MCC code for digital currency purchases was changed by a number of the major credit card networks”. “The new MCC code will allow banks and card issuers to charge additional ‘cash advance’ fees. These fees are not charged or collected by Coinbase,” Coinbase emphasized.
Merchant category codes (MCC) help credit card companies distinguish between vendors. Like petrol stations, hotels, shops. Depending on the purchases, Credit card companies may charge additional fees, including higher interest rates. A popular Visa card charges 5% of the total transaction. So annually, the card charges an interest rate of 26.24% while other purchases comparatively incur 16.24% to 24.99%.
What’s the Reason?
This major step taken by card companies wasn’t a surprise as it was a multitude of factors at play. To explain, the probability of the cryptocurrency market to crash could result in hordes off buyers to default. Among the extreme, there have been reports of people mortgaging their homes in an effort to buy Bitcoin. The imposition of higher fees would result in people being more watchful of their purchases and decrease defaulters.
In conclusion, it would be wise to purchase cryptocurrency using other methods. Exchanges, such as Coinbase, accept linked bank accounts and credit cards. Therefore, keep in mind that these purchases can take a few days to complete.