Wells Fargo Bans Cryptocurrency Purchases on Its Credit Cards
bloomberg.com
bloomberg.com
If this upsets you view it through the lense of risk management than any sort of value judgement of crypto currencies.
If the rate of charge backs starts climbing the issuing bank will take notice. Investing is not something that should be done on credit, especially for something with the volatility of crypto currencies.
> A study conducted by LendEDU last year found that roughly 18 percent of Bitcoin investors used a credit card to fund the purchases. Of those, 22 percent couldn’t pay off their balance after buying the digital coin.
This is just depressing:(
But I remember in 2013, I read about someone who was planning on maxing out their credit cards to buy Bitcoin at $90. I was exhorting them not do it...
Ha. I wonder how they fared.
Did not become a millionare...
A friend of mine got super lucky with crypto, though, because he lost his password.
He bought Ethereum when it was being hyped on Kickstarter and mostly forgot about it. At the end of last year, he saw the price, freaked out, and figured out how to crack his own password.
So, he ended up buying at the lowest point and selling at a very high point, like $700. I think he made a few million on it.
Source: someone who should have sold at 1400 and joined the millionaire club.
I'd sell what gets me retirement now, and hold onto the rest - see where it takes me.
It's paid for some dumb stuff along the way to where I am now, chartered helicopters to Macau, laps around the Nürburgring, ect, but the price of all this shit has become so decoupled from the underlying technology and mostly scams at this point that I want to own something "real".
(Just wanted to add an example where the based saved some people)
Though.. if I had my wits, hopefully I'd be selling off chunks. Ie, at $18k/coin I wouldn't sell the whole thing.. though, at only $100/coin it would have been tempting.
Ah, life.
While no one likes throwing a grand away, it's also not a lot of money in the grand scheme of things. So why not take a chance? It's not like you'll see 20 opportunities to invest money into something pop up every year.
People in general are too conservative. You should allow yourself to take (calculated) risks once in a while.
And even then, holding a corner on supply of an untested asset is still no guarantee it will perform. Sergey Brin and Larry Page tried to sell Google to excite.com for a paltry $5MM ... and Excite turned them down. Even they, who of all people should have had the utmost confidence in the future (and control over supply)of their own brainchild asset, didn't fully understand the significance of what they were sitting on.
Feel free to Venmo me consulting fees.
Because it's gambling, and a lot of the currencies won't work at scale, so it can be considered a 0-sum game.
> But I remember in 2013, I read about someone who was planning on maxing out their credit cards to buy Bitcoin at $90. I was exhorting them not do it...
Hindsight is always 20/20. If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height.
I worked as the sole IT person in a big (~300 computer) university department. My predecessor had placed folding@home (IIRC) on many of the lab computers. This was around 2009-2012. I removed it; he didn't have a "team" assigned or anything so I didn't think much of it.
I didn't hear about cryptocurrency until late 2012, but occasionally the "what if" pops in my head and I go -- I could have put a lot of miners at 50% load -- even just at night and made quite a bit had I waited till the first boom (~2014), or lots if I held till now. Highly illegal, but unlikely to get caught.
But that's a lot of "what-ifs", and it's all easy in hindsight. Useless to dwell on it, but hard not to sometimes!
I know a few people who mined a few coins for "shits and giggles" and then lost/deleted them before the whole cryptocurrency thing really started going because they thought it would never happen. I might have had some at one point too.
They are using the fraud protection part of their credit card, not the loaning money part.
Yall are throwing your conservative investment advice at everyone and backwards validating your risk-adverse behavior.
It would have paid off mightily.
That said, I couldn't afford it. It was a bad decision for me then, so I'm glad I didn't make that decision. It was the right choice, even though it would have been very profitable.
Just do the math. Don't listen to people and their hard and fast rules. If you think 200x or 1000x is possible just do it and make sure you take some off the table after it 4xes so you're always up.
And Wells Fargo agrees!
To paraphrase you: you used your credit card because you felt the transaction was a risk and wanted to shift that risk onto another party. Banks don't like their legislatively-mandated fraud forgiveness being used as a risk buffer, and this is the tool they have in their box to deal with that.
Yes, they are different risks. But the issuer is still worried about fraudulent charges initiated by the merchant, in addition to the risk that nomocrypto will fail to pay off the balance.
Are they though? Generally the risk of merchant fraud is borne by that merchant's processor. There is some overhead for the issuer in processing chargebacks, but if this were an issue then we'd expect to see many other types of fraud-prone online merchants being banned.
It seems clear that this is an extension of the common prohibitions on using credit cards for gambling.[1] But I should add that it's not that they're worried about failure to repay. That risk is generally controlled by credit limits. It's the fraudulent chargebacks that cardholders initiate when they lose their money.
[1] https://www.creditcards.com/credit-card-news/10-things-credi...
Yes, they definitely are. Trust me on this one.
> The credit card issuers are not particularly worried about fraudulent "merchant" charges.
Sort of true, but... isn't that exactly what happened here? The reasons banks don't sweat merchant fraud is that they can just refuse to do business with them. And here Wells Fargo is preemptively deciding that all exchanges are shady.
non-payment of credit card debt is risk between cardholder and bank/processor. bank/processor should prefer to ban customers like this, not vendors (if possible). Customers can "launder" money through many sources (cash advance, cashback, shady businesses) if they intend to put that money in a speculative investment and maybe not pay back the debt.
bank vs processor is another dimension of complication to sort out.
Can't ding their credit rating if their card details got stolen.
Not to put too fine a point on it, but that's exactly why many banks will begin to take actions like these. It is terrible though that crypto purchases are starting to be placed in the same risk category as porn.
(Actually, now I think about it, crypto is being put in a HIGHER risk category than porn. Ouch.)
Which isn't unwarranted. Porn companies have challenges, and as shady/deceptive as some of them are in rebilling, they also have a limited number of processors they can use, so they have an interest in not getting kicked off.
Shitcoins don't care. Milk up all the cash you can, disappear. Who cares whether the processor cans your account?
That's pretty damning to me. I would be willing to bet that 81% of porn sites are not scams. So putting crypto as a higher risk category seems correct to me.
(I also recognize that there's legit exchanges, especially outside of the world of ICOs, but crypto seems to have a massive fraud issue now.)
> crypto is being put in a HIGHER risk category than porn
Most banks won't let you open up a merchant account for your porn site, but they typically won't block purchases from said sites.
More likely they are afraid that it will be a high cost for them with very little reward.
> More likely they are afraid that it will be a high cost for them with very little reward.
That, that, that is the same thing.
Why shouldn't you be able to buy things with arguably non-zero EFV as long as you are in good standing on interest and principal?
Buying investments of dubious value on credit though...isn’t this how the 20s ended?
Buying a non-investment of dubious value... Yes!
Buying a different investment of dubious value... Yes! (commemorative coins, stamps, comics, beanie babies, etc)
If you use your credit card to pay for things you cannot afford, you are only doing yourself financial harm.
Credit cards are for building credit, generating rewards, and short-term borrowing.
If you are charging thousands of dollars to your credit card and planning to pay it back years later when you make more money, you're effectively just paying 1.5-2.0x the cost for everything you buy, because every year you are going to pay at least 15% in interest, and since you are spending more money than you make your debts will never go down.
Don't borrow from your future self. It makes no sense, and there's literally no guarantee that you'll ever make more than you do right now.
In this case, likely many otherwise reasonable people are all suddenly making bad investments before their credit history can catch up to it. The CC company wants to avoid that risk, and so bans that type of purchase to get ahead of it.
The credit card companies' business model is similar in some ways to insurance. They skim a bit off the top of each transaction, and in exchange they bear various kinds of risk. One kind of risk is default/bankruptcy, as another commenter has mentioned. There's also the problem of fraud: since cryptocurrencies make it relatively easy to launder money, a Bitcoin purchase is disproportionately more likely to be fraudulent, even if the account is otherwise "in good standing".
(Note that it may also make sense to discourage or disallow gambling on credit for public policy reasons. For example, a number of states already prohibit the sale of lottery tickets using credit cards, even though those tickets have a non-zero expected value.)
All this really means is that the banks' analysts are substantially more skeptical about cryptocurrencies than their average customers and they are trying to reduce their own risks.
If someone borrows more money than you can afford to pay back because you expected a guaranteed profit investing in a high-risk market, the cryptocurrency was never the problem.
Their completely irresponsible use of debt was the problem.
People can just as easily sink all of their liquid cash into cryptocurrencies, subsequently lacking the capital to repay their exiting debts.
What about it is depressing, the bad credit these people now have? I doubt they were all actually broke, they just didn't pay off the debt because it's dumb.
I'd find it depressing if the individuals actually paid it off... the sensibility of walking away and taking the bad credit is precisely why these credit companies are prohibiting this class of purchases. It's not a favorable scenario for the creditor.
I suspect you mean in the specific case of gambling on cryptocurrencies with consumer credit.
However, people purchase all sorts of investments on credit as a run of the mill occurrence. Houses, shares, forex. There are usually specific loose types for each investment type, purchasing a house on a consumer credit card would be fairly crazy.
Incorrect. Apparently a lot of users intentionally chose to not pay it. The original study (link: https://lendedu.com/blog/bitcoin-and-credit-cards/) asked whether they did pay it off, not whether they could. See question #3 and #4. A crucial, but important difference that changes the interpretation of the study.
I think in the absence of actual numbers, it's pretty irresponsible for you to assume that "a lot of users intentionally chose not to pay it", just because of the way the question was phrased.
Sure, there were some people who just decided damage their credit and owe thousands in interest because they couldn't be bothered to pay their outstanding debts, despite being able to afford doing so. I would not expect this group of people to be substantial - certainly not "a lot of users".
Easy: they could expect to make more profits than the cost of interest.
«I think in the absence of actual numbers...»
In the absence of actual numbers, the journalist is simply jumping to conclusions by assuming everyone is unable to pay the debt.
This is all anecdotal now. You took a semantic argument and you're running entirely too far with it now.
>In the absence of actual numbers, the journalist is simply jumping to conclusions by assuming everyone is unable to pay the debt.
Which is a fair assumption.
If you zero cash, and $15k in debt, you will not be able to pay your debt.
If you have $10k in cash, and $15k in debt, you are insane not to pay off as much of that debt as you can with that $10k, because the interest will keep accruing every month.
People who fail to understand these concepts likely already have a terrible credit rating because they lack the common sense to avoid making bad decisions with debt.
I paid my bill off the same day my purchase cleared.
Why can't we just use the existing credit reporting system to manage risk here? Those 22% of investors that were unable to pay off their debt can just suffer a blow to their credit score for irresponsible spending.
Spending credit on crypto isn't a sign of risky behavior - spending more than you can pay off and failing to pay off what is owed is.
It most certainly is if you cannot afford to pay it off after making the purchase. The get rich quick aspect of crypto enticed these people to leverage their credit card.
Borrowing money you cannot pay back is the risky behavior.
Just because people were enticed by cryptocurrency doesn't mean that cryptocurrency is the problem. The problem is spending more money than you can afford to spend.
We already have a system of checks and balances for this. If you borrow more money than you can pay back, you take a hit on your credit that can last years, and banks will trust you less in the future for your high-risk behavior.
Anyone with a credit card should be able to use their line of credit to purchase anything they please - your history of paying the debt back is all that really should matter, not what you spent the money on.
The overlap between the set of people who "invest" beyond their means in cryptocurrency and the set of people with so little grasp of risk management they express views like "anyone with a credit card should be able to use their line of credit to purchase anything they please" is of course another strong reason for them not to want to touch crypto with a bargepole...
I have been doing this for years. While I have been lucky to consistently pull a profit, I never invested more than I could afford - and I certainly never planned to see a single cent I invested return to me (as one should assume with any investment).
If you are buying any cryptocurrency with the expectation of reselling at a profit, and you are falling into more debt than you can afford to be in while doing so, the issue was never cryptocurrency, but rather your willingness to borrow more money than you can afford to pay back.
Given that profits were never a guarantee, anyone expecting guaranteed profit already exhibits the kind of high-risk financial decision-making that deserves a low credit score as a consequence for unpaid debts, regardless of what they spend the borrowed money on.
Crypto companies could default to push payments and/or micro-deposits for verifying ownership of a fiat instrument, but people want their coinz now and that causes friction that shrinks user activation funnels.
Merchants have to keep their CB ratios under 1%, or else Visa/MC/the bank processing their fiat will fire them. Bank fraud analysts probably have their own bank-side incentives to give customers the benefit of the doubt, and it's too easy for someone to maliciously load up on 2+ months of purchases, walk to their bank, state "I've never heard of Bitcoin someone hacked me and bought $6k in crypto I need that back", and win.
If people are speculating beyond their means in crypto because they think the line of easy credit gives them a means to make a profit out of it, it's far easier for everyone involved to just cut the line of easy credit for the crypto, because the same person is probably not going to try to make a profit loading up their card with consumer goods or cars or other things the credit card company doesn't mind extending credit for instead.
I really don't understand why you believe it is reasonable or preferable to oblige credit card companies to take losses instead.
There's no reason the banks cannot be proactive in assessing risk and protecting themselves from high-risk purchases. You can't buy poker chips or stocks with credit cards; a ban on buying crypto with credit is in line with this.
Take a look at what AMEX said when they banned porn 18 years ago:
https://www.zdnet.com/article/amex-just-says-no-to-porn-site...
>"The decision was ... based on about a year's worth of work we've done with this industry," Fisher said. "There was an unacceptably high level of customer disputes. We worked with the industry, but the challenges remained, and we just decided it was no longer profitable or practical to work with this industry."
(I think I recall reading porn companies pay exorbitant credit card processing fees due to high chargebacks.)
I can imagine a higher than average percentage of Bitcoin purchases were fraudulent and the card issuers were having to deal with a ton of chargebacks and disputes. If these purchases yielded more cost than profit, they'd be crazy not to ban them - you don't participate in a business activity where you are losing money.
There is no "should". The lenders are private companies who are lending you money at their own discretion; it's entirely their prerogative to stipulate how that money can be used. Naturally, when a certain product category has a high default rate, the lenders act in accordance with their self-interest and stop allowing their money to be squandered by blockchain gambling.
This was the full sentence:
> Spending credit on crypto isn't a sign of risky behavior - spending more than you can pay off and failing to pay off what is owed is.
This part:
> spending more than you can pay off and failing to pay off what is owed is.
is equivalent to your statement:
> It most certainly is if you cannot afford to pay it off after making the purchase.
Even on cards without any rewards, credit cards already have a way to get money from your credit card: cash advances, and they carry a higher interest rate and lower limit generally.
The rewards outweighed the fees.
The fees the vendor pays outweigh the cashback too. He says he paid $5 in fees, but that doesn't include the vendor's fees, which were probably baked into a lousy exchange rate.
I don't think there's any card that offers more than 1.5% cash back on everything (some offer above 1.5% on certain things). And most fees are at least 2%, so just on the transaction fee alone they cover the cost of points/cashback.
> I don't think there's any card that offers more than 1.5% cash back on everything
Not quite true. For example the Citi Double Cash is a card that earns essentially 2% cash back.
> And most fees are at least 2%
Also not true. It depends on your card category (MasterCard World, MasterCard Elite, Visa Signature, Visa Infinite, etc) and purchase category. This is just the interchange fee, but even including other types of fees, a basic no-frills card can easily cost the vendor <2% in total fees.
See all the MasterCard interchange rates (Visa is similar): https://www.mastercard.us/content/dam/mccom/en-us/documents/...
If they are truly doing this to protect vulnerable customers, that's great. It'd be a rare occurrence though. Credit cards are basically designed to sneak credit into people's lives, by merging it with a payment method.
That a third party is involved in deciding whether or not a purchase is too "risky" to allow is precisely why I want to move to cryptocurrency instead of banking.
It is entirely reasonable that your would-be creditors can refuse to lend you money for certain kinds of purchases.
They won’t stop you from paying with YOUR money, but if you use a credit card, you are paying with your bank’s money. They will then charge you for it. If many peope can’t pay the money back, the bank looses.
That's how the real fortunes are made. Invest on credit, reap the profits if it works, leave the credit supplier holding the bag if it doesn't.
Rinse, repeat until you hit a live one.
> That's how the real fortunes are made. Invest on credit, reap the profits if it works, leave the credit supplier holding the bag if it doesn't.
Not all debt is created equal however. Credit card charge-offs can trash your FICO score, and I suspect many who are using credit card debt to fund "investments" are more highly dependent on their consumer credit than those buying real estate with house money.
No it didn't! There was no guarantee that the value was going to keep going up! If you invested like it was a guarantee of profit, you absolutely should never ever invest - even if you managed to profit off of BTC.
Remember, for every person buying Bitcoin because the price was going up, there was somebody else selling it because they thought the price was likely to drop. In a speculative market, you cannot look back at past performance and declare it "makes total sense" for everyone to have had invested recklessly during that time period.
You'll likely use that same excuse to invest wildly again later when it looks like a sure-bet again, and if you're wrong (as many people have been in crypto markets) you stand to lose a massive amount of your net worth in the process.
Personally I view it through the lens of a being a customer. If Wells Fargo doesn't support payment for as wide a range of goods and services as a different bank, then I will close my Wells Fargo account and take my business elsewhere. They are perfectly within their rights to offer whatever services they want, and I'm perfectly within my rights to reject their substandard offer and accept a more flexible offer.
Fraud: I steal someone's credit card and use it to buy crypto, then move that currency somewhere unrecoverable. The card company is unable to recover anything. (This can be mitigated by recovering from the exchange in some cases.)
Fraudulent conveyance: Holder maxes out all their credit cards buying crypto, hides it, then claims bankruptcy. Card companies can't recover anything. (Yes, you could do this with something like gold, but it would be a lot harder to hide and sell later on.)
What is the % of people that bought smokes, alcohol and other harmful substances.... and could not pay back?
What about the % of people that bought iPhones on credit and could not pay it back?
The number needs to be taken as a comparison to other purchases (it is Credit after all) to see whether it is higher or lower than the typical credit card purchase.
At least with crypto (or any forex) you have purchasing power vs. Buying over priced meals, useless gadgets and drugs such as coffee, wine or cigarettes
Nothing wrong with that.
> Of those, 22 percent couldn’t pay off their balance after buying the digital coin
Ohhhh no.
There are some banks that have blocked pornography and medical marijuana purchases.
But basically, the pattern is clear: banks don't want to lend you money to make investments. Banning money orders is a natural extension of that because you can then go use that cash for the aforementioned things.
That makes a lot of sense, because if banks did want to make those investments, they don't need you. If a bank wants to invest in stocks, property, or a game of roulette, they can just go put their money there, no credit card customer required.
What banks can’t do without lending you money is get a little slice of your paycheck every month through interest payments. This is a separate asset class than things like stocks.
Obviously if they accept them, there must be some banks that don't mind, but I know that many issuers won't accept the transaction. Kind of like the situation we have here: Wells Fargo blocks cryptocurrency purchases, but not every bank does.
My Citi is a MasterCard and I've never had problems paying my mortgage with it. I did just last month. So Visa and AMEX won't let you pay mortgages but MasterCard is ok with it.
As a proof of concept, the very first coin dealer I just found randomly using Google takes all major credit cards and sells silver by the ounce. Well, gee whiz, I can run up my cards buying silver ounces, walk down the street, sell them at a different coin shop for cash, then go buy whatever I want. Hmmm... What is the real reason banks don't want people making certain investments??
Honestly, the responses in this thread from bitcoin people...it’s like they’re just now realizing that banks have intelligent employees working for them.
Here's a random credit card from American Express. Cash advances have a drastically higher interest rate, PLUS a 3% (minimum $5) transaction fee.
https://www.americanexpress.com/us/credit-cards/card-applica...
Same pattern for Chase Sapphire Preferred. Higher APR and this time a 5% (minimum $10) transaction fee.
https://applynow.chase.com/FlexAppWeb/pricing.do?card=FS6K&p...
With regards to cash advances, they come with much higher APR rates, to account for the increased risk and are often not available to card holders with low credit.
Perhaps Wells Fargo would be more amenable to their customers buying crypto if they were able to charge a higher APR for such transactions, but I imagine this isn’t such a simple change given the many parties and agreements involved.
As others have pointed out, the other aspect is fraud. Perhaps the anonymous nature of crypto currencies attracts more fraud payments than bullion?
However, I am highly skepticle that you can buy silver with a credit card and then sell it for cash “down the street” without incurring huge transaction costs in the process. I’d be surprised if the process was even 80% efficient.
Source: I once negotiated a cash price for a jewelry piece in downtown Portland, Oregon and the jeweler accepted bullion I wanted to liquidate at quoted spot bid in lieu of cash for part of the price.
If you are talking about getting "SAR levels" of USD folding green, though, you're going to need to make an appointment in advance. Plus, heavy. So the "walk 1600 oz of silver down the street" strategy has a number of practical impediments beyond the spread.
Anyways, as an American who's grandfather landed on Normandy in WWII and who actually has roots back to the Mayflower (I do!) the very idea of an "SAR level" makes me fricking sick. Disgusted. People should be free to do what they want with their money and not have to tell anyone anything, period. Not only with their money, either..with their free time, the communications, their travels, their bodies and souls...LIBERTY should not just be an empty slogan on cheap metal coins and in songs and engraved on old stone statues.
It is really too bad what the USA has become, and I hope that the future will see a brighter day for "we the people"..
(Edit, adding: I just did a quick peek around the web and found spreads as low as 0.6%, if you buy and sell with that same particular company. In fact they also will hold it for you so you don't even have to physical take possession and deal with mailing or transporting it at all. While I would expect they may have some rules about that, it does show how competitive the market is and gives some idea of the situation.)
If you buy gold and resell it whereever then you have cash. The casinos in Vegas don't ask a lot of questions, nor does anyone else, really...(yes, this includes the good ol' Moonlite Bunny Ranch too..lol)
All I'm saying is that you can easily get cash from credit cards which you can then buy whatever with, so I just don't see the point (well, I may...) of them limiting your usage of their cards.
> Hmmm... What is the real reason banks don't want people making certain investments??
If you're suggesting some kind of conspiracy against cryptocurrencies by banks, you should provide some evidence to counter the entirely reasonable justification about the high default rate the article has given.
-Adult Entertainment
-Cash Advances
-Check Cashing/Guarantee
-Child Pornography
-Condo (Real Estate) Down Payments
-Door-to-door Sales
-Credit Restoration Services
-Escort Services and Non-Licensed Massage Parlors
-Financial Services
-Foreign Exchange Bureaus
-Future Services
-Gambling
-Lottery Sales
-Marijuana Dispensaries
-Mortgage Payments
-Multi-level Pyramid Sales
-Payday Lenders
-Prostitution
-Timeshares
-Travel Tour Operators
-Unlawful Sale of Prescription Drugs
-Unlawful Sale of Tobacco and Smokeless Tobacco
-Unregulated Charities
-Virtual Currency
Section 10.2 Prohibited Merchants: https://icm.aexp-static.com/Internet/NGMS/US_en/Images/Merch...
(I believe they are some of the most conservative with transaction risks among the Big Four credit processors in the US)
I wonder how they manage this. Is there a database of known child pornography vendors who accept credit cards? Seems like an odd thing to specifically call out.
I don't know of the specific laws, but that leaves open content that may be legal (books, comics, drawings, fanfiction).
By the way, "Travel Tour Operators" doesn't include all travel tour operators, just rouge ones: "Travel Tour Operators without membership to a Travel Industry Bonding Agency or not an authorized ticket agent (e.g. ARC/IATA/ABTA)."
Also "Adult Entertainment" only applies to Internet porn, "Internet adult digital content sites," so you can probably still use your AMEX to buy a DVD at a brick and mortar porn store.
See "Studio Seventeen" of Netherlands.
Liquidity isn't the problem; price stability is. And gold and silver are not generally problematic as far as price stability goes. The gold and silver can be liquidated for something close enough to the original purchase price that Amex doesn't seem to care.
Um, yes. Years ago a previous tenant of the place I was renting got served in a lawsuit from a credit card company. They apparently didn't have the current address for the person so the papers were left at my house several times. It wasn't that much either, less than $2,000 IIRC. I called the lawyer and let them know they were serving the wrong house.
Anyways, if they sell the debt to collections the collections agency can (and does) sue the consumer.
A family member of mine was also sued by a hospital (not collections) for unpaid hospital bills less than $1,000.
Anyway, if AMEX doesn't disallow precious metals then, for whatever reason, they must not have a high fraud/chargeback rate or they don't have a high default rate for those transactions. It's business.
Also, buying something and reselling it for a profit is a totally valid use case for a credit card, they can't meaningfully prohibit that, nor would they want to, since that includes pretty much the entire category of "business expenses."
American Express is a business and they know the type of activities that make them money and the kinds of activities that don't make them money. They wish to participate in the former and avoid the latter. If you're upset about businesses avoiding activities that lose them money, you're going to be upset all the time.
I have been served myself, by the way. They do not leave papers at a house. Legally serving someone means the papers must be given directly to the person, and if that person refuses to take them, left at their feet (literally). That is the definition.
The hospital situation might have been a small town hospital using Small Claims court or something, but even still, the expenses involved would not make it worthwhile for a lousy grand.
I'm not trying to call you a liar or anything, astura, but you are either talking about a very long time ago, or you are somehow mistaken about the nature of these events. And as far as "serving" goes, I don't think that has changed pretty much forever.
Who's upset, anyways? I don't care what businesses do. If Wells (the article wasn't about AMEX, by the way) doesn't want peoples business, screw 'em. I'm sure someone out there will happily give credit to people with the right job and other credentials.
Credit card companies mint money, as do most banks. They rarely lose or go out of business, do they? That's why I'm so suspicious about their motivation here. They happily loan money to college kids (who buy mostly beer, junk food, and spring break flights to Cancun with it), they happily let people use their cards at liquor stores, and the majority allow for cash advances (note that their are always ATM machines in casinos and strip clubs and bars and nightclubs, too). You don't think this is just a little bit weird, huh?
Similar restrictions are commonplace for things like money orders, western union, and prepaid credit cards.
https://www.marketwatch.com/story/steve-wozniak-had-70000-in...
Sure, you can use your checking account, but if my credit card is going to restrict my usage and I'm going to be hassled into circumventing it, then why even have it?
I actually have a Well Fargo credit card, I'll be keeping an close eye on these restrictions.
When you say “why even have it”, the answer to your rhetorical question is “it’s still a useful, and some might say necessary, financial tool”.
Disclaimer: I work in risk management, but not at Wells.
...those aren't money.
Last winter whoever held the information of 1BTC held the equivalent to 20,000 real tangible USD’s that they could take to the bank, exchange for food, etc. Today that same kind of information isn’t as valuable in the marketplace, but it’s still as “real” as anything once we get past the misconception that all things real must exist in one physical form.
TLDR; Is it real? Absolutely. Is it valuable? Right now it is.
If you lock a nugget of gold away for 5000 years in an unbreachable time capsule, it will still be a pliable and lustrous metal when you dig up, if you do the same thing with a wallet private key, you can't even be sure if the token's network exists much less all the infrastructure that it depends on to even exist.
If you're able to ascertain a wallet private key 5,000 years from now, it'll still be as 'real' as it is at this moment. Just maybe not as useful/functional or valuable.
Well... unless in 5,000 years there is a crypto museum out there willing to pay significant sums for anyone who can produce a valid private key for an address that once had a transaction on the blockchain.
This is more similar to buying pre-paid credit cards or a money order with a credit card. It has been 5 years since I worked retail, however most places didn't allow that. Debit cars were fine because they were cash backed, and the bank (and everyone else involved) had a bit less fraud and things to deal with.
These sorts of restrictions are nothing new. Though this restriction might be limited to Wells Fargo right now, I'd not be surprised if this becomes standard much like the examples I listed above.
Except that it doesn't because people aren't buying $10,000+ in gift cards on the hope that they will increase in value and then defaulting on their CC payments because said gift cards crashed.
When trying to solve a problem you have to focus on the actual problem at hand, not philosophical musings.
Thinking about it that way, I'm surprised there isn't some kind of limits on gift card buying. (Or maybe there is, and I haven't read my agreement well enough.)
It's much harder for a cryptocurrency exchange to reverse a transaction.
No one thinks a $100 Best Buy card will be worth more than $100 in the future, so people don't load up on them looking to make a buck.
In fact, you know it will be worth less!
Buy enough of those and your bank is likely to shut you down. FlyerTalk is full of threads about this. There used to be a number of easy ways to buy Visa gift cards and then cash them out to your bank account. You could send a couple thousand bucks in a circle earning points off each purchase.
There is only one place I know of where you can buy cash like gift cards in significant amounts, and many cc companies do post it as a cash advance (with the associated interest and fees). Everywhere else that you can buy visa/mc/amex gift cards the denomination is usually maxed at $500 and the store won't let you do too much, but there is a healthy cottage industry leveraging that (both legit and fraudulent).
In-game currency is really just store credit. It cannot be easily converted to cash and is thus not really considered a loan.
Selling either in-game currency (where possible) or store gift cards usually requires giving up as much as 20% of the value and thus isn't seen as a viable option.
CC companies don't want you to view them as a cash funding source, they want to be directly between the customer and the store not the customer and his/her cash. Especially cards with high "cash back" returns.
When you buy a $10,000 TV on a credit card, and can't make your payments, you're an idiot. There are a lot of idiots, but very few of them will do impulse purchases like that - because they understand that next month, they'll have to pay for it.
When you invest $10,000 of money that you pulled from a credit card... People feel completely different about that. If you have confidence in your investment, why not borrow money to fund it? You'll make that money back, and pay the debt off! If you don't have confidence in your investment, you wouldn't be investing anyways, with your own dollars, or borrowed ones.
Investing self-selects people who are (unreasonably) confident in the return rate on their investments. This is why you can't buy stocks or bitcoin on a credit card, but you can buy Magic: The Gathering cards.
Your credit card always has restricted usage. You probably can't use it for gambling, buying stocks, or to pay for a call girl either. If you have an American Express you can't use it for internet porn or to buy your LuLaRoe "inventory."
No, because there's this thing called "context", which is notthe same in those situations.
Even if it's deemed unacceptable to disallow over-risked services like credit cards to purchase cryptocurrency, then the beauty is that cryptocurrency purchasers can migrate their loans, and savings to another banking provider who will service the headache of credit-backed cryptocurrency investments.
What this tells me is that there have probably been a lot of chargebacks related to cryptocurrency as the coins have fallen and people are trying to make up their loss by putting on "the evil bank".
I would actually give props to Wells for being the last major bank to ban it.
But TBH they probably do it because cash advance has a higher APR.
Which seems reasonable to me — if someone is at the point they need to borrow cash from a credit card, they’re probably a higher risk of default.
Abuse is the credit system and its marketing writ large.
Weird, isn't the whole point of setting a credit limit that you assess how much risk a given person can sustain?
Seems to me like banks want to hand out high credit limits to entire overspending, under the assumption they can make their money back twice - through reposession + obscenely high APRs in the 25%+ range.
Meanwhile, every time I go to a casino ATM I see prominent signage on how to use one's credit card to obtain casino credit. They don't block these transactions, they just factor the existence into the calculations for a credit line...
That is very misleading. They "allow" casino transactions in the form of cash advances, not directly to the card as someone might infer from the way you constructed that sentence. The reason this detail is important is because a cash advance can be used to buy blockchain tokens just as easily as it could be used to buy casino tokens, and they're both relegated to the cash advance scenario for the same reasons.
The cash back loophole works like this: buy crypto on coinbase with credit card, then immediately sell and transfer to checking account.
Crypto companies could default to push payments and/or micro-deposits for verifying ownership of a fiat instrument, but people want their coins now and that causes friction, which shrinks user activation funnels.
Anyone using a fiat on-ramp to accept payments (including exchanges) has agreements with Visa/Mastercard/AMEX/their bank to keep their charge back ratios under 1%, or else Visa/MC/the bank processing their fiat transactions will fire them (good luck running a business accepting fiat without access to the card networks or a bank).
Bank fraud analysts probably have their own bank-side metrics/reasoning to give customers the benefit of the doubt.
For example, if the fraud analyst sides with a merchant and denies filing a friendly fraud (maliciously filed) dispute, maybe the customer complains to their manager, and takes whatever sympathy-inducing narrative to social media, which would get an analyst fired and make a bank look even less sympathetic.
Through that, it's too easy for someone to maliciously load up on 2+ months of purchases, walk to their bank, state "I've never heard of Bitcoin someone hacked me and bought $6k in crypto I need that back", and win. It's not worth the headache until/unless banks and exchanges bridge the gap and determine a means of:
1. Confirming the exchange isn't providing liquidity to money launderers 2. Confirming with the bank that the KYC info requested sufficiently fulfills #1 3. Confirming with the bank that the KYC and payment instrument info (if fiat) requested sufficiently provides evidence that the owner of the instrument authorized the payment.
What did work was a wire transfer. This was a $30 fee paid to Wells Fargo and on top of the $10 fee from Coinbase, making it cost $280 to credit my account with $240. Wells Fargo took 3x the fee and the conspiracy theorist in me believes this is their primary motivator for doing this. You can get your money out to do what you want with it, but not without a steeper penalty than the exchange. Now that this stance is official and if I hadn't lost money (to take a simple view, that $240 is now worth around $75) I'd be looking to open another account somewhere that doesn't try to tell me how to use my money. When I realize this other account at whatever mythical bank is somehow superior in every way, I would ditch them completely. It doesn't seem like the greatest move on their part but they could also be counting on the fact that I may never do this because of the hassle involved with changing everything over.
If they want to mitigate their risk they should bring debit cards up to the same level of fraud protection that credit cards enjoy. Instead we get the Zelle shitshow that only a fool would use.
- how is buying a currency like the Bolivar allowed (50,000% plus inflation)
- coinbase limits purchases to about $100/USD per week...how much risk is really being exposed?
- why is buying depreciating liabilities such as computers, software, harmful drugs (smokes, alcohol, coffee) and overpriced meals and fashion accessories acceptable? (Doesn't alcohol hinder purchasers health and make it harder to pay back due to death and other problems?)
-Where was their "risk management" when they socialized their bets in the 2008 crash?
- why do they keep extending lines of credit to the USA gov for the purchase and sales of billions of dollars of yearly foreign arms sales?
Now, considering that bitcoin is MEANT to replace banks as its modulus operandi and enable p2p transactions (ie: cutting out middlemen - banks!).... it becomes apparent what they are really doing: trying to stop the leviathon and holding onto their business model.
Observe their actions, not their words and then their intentions will become clear.
Question, I might default on my purchase of diapers for my baby. Someone might also fraudulently purchase diapers for their baby using my credit card.
Should these purchases be banned by cc companies as well?
How about instead of allowing to discriminate based on purchases, they just accept slightly smaller margins?
What people are doing is to use those cards as speculation devices. You enter a game of speculation, using your card depth as speculation matter against the crypto currency. It's simple currency speculation, nothing new, nothing special.
But, is this what Wells Fargo wants to enable / service with the specific product "credit card"?
It's a matter of product line-up hygiene on the side of Wells Fargo.
Where I live, debit cards are the standard, and credit is rarely used, rarely accepted, and rarely something you can endlessly lend with. SO when I read "Bank X wants to mess with transactions Y" in my context it's like someone telling you what you can do with your money, but since it's credit, not debit, it's the bank's money and it's pretty reasonable that they get to say what you can use it on.
You can absolutely spend money you do not have, but only for one month, and then your account is closed and probably hit with massive fees.
You don't even think about the idea that there's a line of credit attached to the card that extends longer than 30 days.
Previously, in a decade or 2, I think I missed 2-3 payments due to mistakes on my part. Not horrible, but certainly embarrassing and wasteful.
In America debit transactions are treated differently. Since the money is deducted immediately, if there is fraud you could see your rent money tied up for 30-60 days.
Thus it is prudent to pay for everything with credit cards.
I actually take it a step further and have two checking accounts - one that my paycheck goes in, and one that I keep a couple thousand in specifically to withdraw at ATMs. That way if there is fraud, I've only lost a small bit of money and my bills will be able to be paid.
What prevents wells from saying "I don't want to pay for your wedding because you might get divorced?" What prevents them from saying "no you can't have a cash advance in country XXX because the exchange rate is volatile?"
There is an established remedy for this and it is by removing the ability for exchanges to process cards. Or process them as cash advances.
You already can't buy stocks, bonds, or options with a Wells credit card. This is putting crypto in the same bucket as other securities.
BTC isn't considered a security - https://coincenter.org/link/sec-chairman-clayton-bitcoin-is-...
No matter how you slice it this is the card provider making an arbitrary call, one that should be made at the processor level.
Further down someone points out a bank banned the purchase of guns. Let me be clear that I have no love of americas relationship with firearms. But to decide that a CC can't be used to make an otherwise legal purchase is the beginning of a bad thing. As we become more cashless banks need to be more neutral in their dealings.
A security is: "a thing deposited or pledged as a guarantee of the fulfillment of an undertaking or the repayment of a loan, to be forfeited in case of default."
Bitcoin is an entity unto itself I can buy bitcoin and trade that DIRECTLY for goods - something that is impossible with securities. If bearer bonds were still a thing there might be some argument around directly transferable securities but that is no longer the case.
If I buy on forex (in pips) I can not trade those to a merchant directly for anything - bitcoin can be purchased at an exchange (not a market but an exchange) and used to acquire goods directly.
Lets look at the justification that the article gives:
"A study conducted by LendEDU last year found that roughly 18 percent of Bitcoin investors used a credit card to fund the purchases. Of those, 22 percent couldn’t pay off their balance after buying the digital coin."
What percentage of people can't pay their CC after a cash advance in a foreign country? How about after making a comparable major purchase. If we take those facets into account that %22 probably isn't far outside the industry average.
There were lots of paths Wells (or the other banks listed) could have taken - this was not a good policy on the merits of what they are saying.
I'll take "false equivalencies" for $500, Alex.
Most banks were already coding crypto purchases as cash advances.
So, it makes one think they are being influenced from outside or above (if you consider the Fed to be 'above').
I remember as an irresponsible college student getting checks for $6000 at the beginning of each semester too....and banks setting up stands on campus handing out credit cards to students (who clearly couldn't have had real jobs) like so much candy.
Banks have long promoted irresponsible behavior, and clearly must profit off it. I mean come on.
Consider a bank that refunds ATM fees. I've withdrawn at casinos with boggling ATM fees ranging from 5.00 to 8.75 (!!). My bank has always refunded these charges.
There are several online only banks that have found it's cheaper to refund ATM fees than to maintain a branch network... Charles Schwab has been good for me so far.
Senator: what volume did you process?
Bank CEO: about $800M, madam.
Senator: $800M. And that didn’t concern you?
Bank CEO: well it was within parameters, madam
Senator: let me read you a letter from a single mother who bought $2000 of coins...
Etc.
https://en.m.wikipedia.org/wiki/Wells_Fargo_account_fraud_sc...