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Comment by chollida1 | Hacker News Reader

A few Canadian banks did this back in December.

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:(

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I only bought my crypto with credit because I wanted the reward points.

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.

> Spending credit on crypto isn't a sign of risky behavior -

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.

Again, spending credit on crypto isn't the risky behavior.

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.

Your history of paying the debt back is likely to change for the worse if you're buying some shitcoin with the expectation of reselling at a profit rather than budgeting for repayments from your salary like if you'd bought food or a sofa. Credit card companies have an interest in not supporting behaviour which makes clients a higher risk than their current credit rating would suggest, and that includes not funding gambling or investment products. Especially where the product class is also disproportionately likely to be used as a means of converting a stolen card to untraceable cash and disproportionately likely to be subject to merchant fraud.

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...

Again, this assumes that everyone buying cryptocurrencies are financially irresponsible people.

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.

It's not even about financial responsibility; I'm in no way advocating for chargeback fraud, but people overwhelmingly win disputes and the way these payments are processed promote ease-of-use and ease-of-disputes.

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.

This assumes, based on the actual evidence, that the set of people who buy cryptocurrencies on credit are more likely to default on them than a set of people with the same credit ratings buying sofas (and that raising APRs to cover these increased losses will have other adverse affects on a credit card company's business).

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.

> 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.

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.

Its probably also about fraud and chargebacks.

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.

> Anyone with a credit card should be able to use their line of credit to purchase anything they please

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.

Did you just quote half of a sentence and refute it using the qualifier provided by the second half of the sentence?

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.

buying crypto is a sign of risky behavior on its own :)

Not sure why you're being downvoted... if we accept as true the assumption that the majority of crypto purchases are speculative investments, and not purchases with the intent to use the crypto to directly buy goods, then yes, buying crypto is indeed a sign of risky behavior, since holding crypto as an investment likely gives you a similar risk profile to holding junk bonds or investing in penny stocks.

Blocking transactions with particular vendors as well as classes of vendors is part of the current system of managing risk. Banks already have arbitrary power to decide what transactions to allow.

Credit card companies have closed other “buy money on a card and get rewards points” loopholes, I just see this as another such loophole.

I think this is a big part of it.

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.

credit cards charge a fee, which you get some back as rewards. which exchanges allowed for feeless credit card purchases?

I paid like $5 in fees, but earned like $20 in cash back.

The rewards outweighed the fees.

You of course know most people don't pay the balance off like you did, in which case the typical consumer would pay WAY more than the $20 in cash back.

I used to think banks hated us people who paid off our balance every month, but they still make money on us too...

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.

Interchange rates on Visa are >2%, and there's definitely cards that offer 2% cash back on everything, with the exception they generally bar "cash-like" items like cash withdrawals and t-bill purchases, to avoid holders just churning purchases for the rewards. (There used to be a way to make tons of points for buying like $10K of t-bills on your Visa, then immediately reselling them for $10K, because the Treasury wasn't charging the interchange fee.)

Depending on which banks. Some banks like Citibank and Capital One are known to target the subprime market. They expect to earn more from interest than from interchange fees. Others, like American Express are the opposite. See here for a table: https://www.reddit.com/r/churning/comments/5oucdq/the_econom...

> 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/...

Citi offers 2% cash back on everything with their DoubleCash card. It's the highest general purpose/non-category-specific card as far as I know.

Betting on crypto with your credit card is a bad idea, full stop.

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.

Same as me when I wanted to buy $20,000 at $230.

Did not become a millionare...

The problem is you don't know when to sell it.

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.

$700 is closer to the midpoint of the historical price.

Source: someone who should have sold at 1400 and joined the millionaire club.

You can sell gradually.

Yeah that's the way you buy&sell stocks if you are investing. Not just gambling

And buy gradually too for that matter. There's no way to time a peak/dip so this obviously spreads out your cost basis in case you're buying at the peak. You can also look at it as dollar cost averaging and continue to buy it as it goes down, again reducing your average cost.

Or you sell for what you need, when you need it. Ie, if I had the coin I was debating buying (~1k coins), I wouldn't remotely need to sell them all now. I could retire off a small amount of them, there's no need to sell them all.

I'd sell what gets me retirement now, and hold onto the rest - see where it takes me.

Im looking to dump most of what I have in favor of investing in multi family real-estate. I got big into mining eth starting back in the test net days.

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".

Same as my neighbor when ve wanted to buy $20,000 at $20,000.

(Just wanted to add an example where the based saved some people)

I once aske my uncle his thoughts on investing in bitcoin in cash. Price was about 10 bucks a coin. We both regret talking ourselves out of it

There is no point in regretting such things. You could not have known what would happen to the price of Bitcoin. You probably would’ve ended up selling it for a tiny profit and then you’d still be regretting your actions, or even you could’ve panicked at some point when it dipped a little bit and sold at a loss.

or lost em in mtgox.

I was talking with my wife (then gf) about putting $1000 into BTC back when it hit $1. I don't let it eat me up though, I'm not a gambler, and it's quite likely that I would have sold at some point.

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.

But you'd likely be a lot better off. Putting $1,000 into something promising isn't gambling, it's smart.

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.

At the time it seemed like gambling. Everyone thought it would come crashing down at any time. It was the forward thinkers and the heavy risk takers that invested. On top of that, only crazy people ever though it could hit 20k.

I wouldn't beat yourself up over it. As other commenters have pointed out, nobody knows or could have known where Bitcoin was going to go, unless they were in control of substantial liquid leverage and knew that they could constrain supply indefinitely.

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.

Ask your uncle his thoughts on investing in baseball cards and comic books, too.

They might hire you as one of their risk-averse financial advisers/asset managers next ;-)

Pay off your debt and invest in low cost index funds, kids. Max out your Roth IRA and 401k if possible.

Feel free to Venmo me consulting fees.

> Betting on crypto with your credit card is a bad idea, full stop.

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.

> 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!

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 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.

I don't think they were saying they would buy it on credit, just that they would use their credit card to make the transaction (and then pay off the credit card at the end of the month).

They are using the fraud protection part of their credit card, not the loaning money part.

I think that's the difficulty of being rational and prudent. A few lucky people will get lucky through chance alone. It doesn't mean the process was a good idea and the same is true of the reverse: you can have a great plan but sometimes chances get stacked against you. I loved the book "Fooled by Randomness". Well worth a read if you haven't. Your advice to your friend was sound. There's nothing to regret.

Nothing to regret? If he bought $5k of btc at $90 it would be worth over 300k, even after the crash.

Yall are throwing your conservative investment advice at everyone and backwards validating your risk-adverse behavior.

shrug I bought my first Mac in 2002 as I was quitting my job to go back to college. It was immediately obvious to me that Apple was going places, and I was seriously tempted to buy as much Apple stock as I could swing.

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.

The beauty of hindsight ... it's 20/20, let us never forget that :)

If you play russian roulette and "win", would you say that that was a good strategy? Would you do it again?

I was broke in 2011 due to a founder flaking on a startup we were building. Discovered Bitcoin. Did the math, proved to myself it worked. Maxed the credit card with a cash advance, bought in person, then got a job to pay off the card.

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.

I honestly don't see a thing different between your story, and someone who maxed out their card to bet on roulette.

Because you haven't thought about bitcoin and cryptocurrency enough and instead let others think for you. It's pretty easy to tell the difference between roulette and crypto - including the existence of a house third party.

Yes, because everyone who doesn't share your unicorns and rainbows vision of crypto clearly has not thought about it. It couldn't possibly be that there are people who disagree with you.

"22 percent couldn’t pay off their balance"

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 get what you're saying, but the vast majority of people who have not paid their debts aren't doing so intentionally. Why choses to owe more in interest when they can afford to pay the debt?

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".

In this case, if interest paid < yield. If someone wanted to give an SPV I controlled a loan tomorrow for a few million dollars to invest in crypto, at 20% a year, I would happily take it. But miracles sadly don't happen.

«Why choses to owe more in interest when they can afford to pay the debt?»

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.

>Easy: they could expect to make more profits than the cost of interest.

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 suspect this is less about the credit risk of the cardholders than the risk of unrecoverable fraud, although there's also the theoretical risk of some kind of fraudulent conveyance by the card holder.

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.)

Everything else you buy on your credit card has an expected future value of $0.00.

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?

Eh, to be that guy on the internet, I’ll argue that when I’ve had to put things on credit, they’ve been done in service of a future higher income, like spending more time working on my degree than taking up a low-paying job to cover my present expenses.

Buying investments of dubious value on credit though...isn’t this how the 20s ended?

Buying an investment of dubious value... Nope!

Buying a non-investment of dubious value... Yes!

Buying a different investment of dubious value... Yes! (commemorative coins, stamps, comics, beanie babies, etc)

Just chiming in to say what really needs to be said here:

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.

You don't want to loan money to people who go broke. That's the thing credit card companies want to avoid the most. The whole point of the credit system is to prove that you are someone who pays back their debts.

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.

Actually they couldn't care less if their customers go broke; it happens all the time. They just want their customers to take a long time to go broke, to make lots of charges (transaction fees), and to carry large balances (interest fees). When they're sure you're broke and they can't extract any more fees from you, they'll close your account and charge it off to a debt collector.

John Maynard Keynes almost said, "In the long run, we're all broke."

That's not really true, unless the only things you buy with your credit card are services and perishable goods.

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.)

Credit card companies main business is in transaction processing (both for customer-vendor transactions, and for helping banks administer these revolving loans to customers). The insurance is one feature, not the whole model.

Because when you are buying "everything else", you expect its EFV to be around $0, so most of the people budget it accordingly. But if you are buying an asset hoping that the 100% annual return will pay your credit card interest and help you catch up with your rent, and that growth doesn't happen, it's 2008 all over again.

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.

People. Credit. Budget. ... Choose any two.

>But if you are buying an asset hoping that the 100% annual return will pay your credit card interest and help you catch up with your rent

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.

LendEDU is a shill site run by a student loan company that (probably) fabricated survey results.

https://news.ycombinator.com/item?id=16926859

> Investing is not something that should be done on credit

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.

When Bitcoin was increasing 10-25% a month, makes total sense to max out your credit and pay off your balance the next month. Not sure if this was a risk-tolerant move, or just a risk-ignorant move.

> 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.

>When Bitcoin was increasing 10-25% a month, makes total sense to max out your credit and pay off your balance the next month. Not sure if this was a risk-tolerant move, or just a risk-ignorant move.

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.

I think the voice of my comment didn't come across properly, but if you read the 2nd half, I was trying to express my cynicism about that position. That's why I referred to it as "risk ignorant".

Right, there are similar issues with porn and gambling -- people scream bloody murder about "don't judge me for that" but it's mainly an issue of the extra expenses from customers who swear up and down that "no, not me, I didn't buy that, please reverse the charges" and the processor having to investigate.

.. And make an absolute fortune on chargeback fees in the process. What problem?

> view it through the lense of risk management than any sort of value judgement of crypto currencies.

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.

You’re missing the point. They were spending the banks money, not their own, and they are struggling to pay it back. How will you raise money for investing from a crypto?

They are spending their own money the same way you would be if you bought a tv.

Not when the transaction is happening. The bank will charge you later. If many people can’t actually pay at that point, the bank will loose.

Apply that to crypto. When your balance is zero, how do you get a tv?

Have you never canceled a fraudulent charge or had the credit card company flag something that you didn't purchase?

Literally never.

When you use a credit card to buy something, you are borrowing money.

It is entirely reasonable that your would-be creditors can refuse to lend you money for certain kinds of purchases.

Well it’s their risk though as they need to arbitrate disputes.

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.

So when someone asks you for money, you don't ask questions, you just give it to them?

Take stats like this with a grain of salt. The can easily be tortured into saying what you want. I wonder how many couldn't pay their balance at the end of the month regardless. I mean, it is a rolling credit system. A lot of people only ever pay the minimum.

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.

They're doing this to protect themselves, and by proxy, their customers. Incentives are aligned.

> This is just depressing:(

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.

> Investing is not something that should be done on credit

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.

Not only that, if you trade options or other futures, you are literally required to trade on margin (credit).

That's supposed to say "There are usually specific loan types...". Too late to edit.

If they don’t trust people to decide what to spend their credit on, they should not get credit cards in the first place imho.

So, 4 percent of people buying Bitcoin are doing so on credit. Does not seem so depressing. Normalize by the amount invested and it probably drops to less than 1 percent.

Card swiping/virtual terminals are given at the discretion of the payment processors. Credit limits are at the discretion of the issuer, and are the ceiling of what they consider worth the risk. It sounds like the issuers, once again, had too high of a ceiling and then people defaulted. Very little to do with cryptocurrency.

> 18 percent of Bitcoin investors used a credit card to fund the purchases

Nothing wrong with that.

> Of those, 22 percent couldn’t pay off their balance after buying the digital coin

Ohhhh no.

>If this upsets you view it through the lense of risk management than any sort of value judgement of crypto currencies.

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.

Well yes, but is it any worse than people who use credit cards to fund "retail therapy"?

I don't think 22 percent of those taking 'retail therapy' are defaulting.

I find it kind of ironic though. The risk of crypto currencies is too high, yet the company was ok with creating fake accounts that could totally have been used for fraud.

More likely they are afraid that it will be a high cost for them with very little reward.

> The risk of crypto currencies is too high

> 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.

Sorry, since when did credit card companies start discouraging reckless spending behaviour? This is dimension C-137 right?

To be totally fair, and I know I’m a data point of one, I bought some crypto currency on my credit card (about $75 worth) because I don’t really trust any of these exchanges not to screw up and leak my info, or screw up and charge me improperly. And it’s a lot easier to report a fraudulent credit card charge than get your money back. In fact, this follows my pattern of “buy everything on my credit card unless the merchant absolutely refuses to accept credit”.

> because I don’t really trust any of these exchanges

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.

Actually, these are two different risks. nomocrypto is worried about the risk that the exchange will misuse his payment information to make bogus bank transfers; Wells Fargo is worried about the risk that nomocrypto will fail to pay back the card. The credit card issuers are not particularly worried about fraudulent "merchant" charges.

> Wells Fargo is worried about the risk that nomocrypto will fail to pay back the card. The credit card issuers are not particularly worried about fraudulent "merchant" charges.

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.

> But the issuer is still worried about fraudulent charges initiated by the merchant

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...

> Are they though?

Yes, they definitely are. Trust me on this one.

I'm not sure that's a distinction with meaning. Ultimately nonocrypto is worried that the exchange will behave in shady, fraudulent ways to which he doesn't want to be exposed. Ditto for the bank. The fact that the most obvious expression of those two kinds of fraud are different doesn't really change the risk analysis much. Someone willing to game one end of a system is likely to try to game the other.

> 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.

Chargebacks aren't a risk between cardholder and bank/processor. Vendors pay chargebacks, so chargebacks are a risk between vendor and bank. If a vendor is high-chargeback, or at risk of not paying back chargebacks, bank/processor should ban the vendor.

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.

Well, presumably Wells Fargo is worried about two things: The buyer not being able to pay them back AND that the buyer's card details are being used fraudulently.

Can't ding their credit rating if their card details got stolen.

"...because I don’t really trust any of these exchanges..."

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.)

The correct point of comparison is probably gambling, since that’s the outcome most people expect from cryptocurrency.

> (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?

What are you even talking about? Shitcoins? These are exchanges which have just as much reason to want to keep their credit card processing as any business.

Sure, but the problem is the seemingly very high amount of shady behavior in cryptocurrency. EG: In one category, you have reports like this that say 81% of ICOs are scams. (https://www.bleepingcomputer.com/news/cryptocurrency/81-perc...)

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 purchases are starting to be placed in the same risk category as porn

> 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.

Why is it depressing?

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

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