Buying Cryptocurrency with Credit Card? A Big No-No Warns Coinbase

Buying Cryptocurrency with Credit Card? A Big No-No Warns Coinbase

According to a recent survey conducted by LendEDU, nearly one in five bitcoin investors made their cryptocurrency purchase using a credit card. Of that subset, 77.87 percent reported that they paid off their credit card balances after purchasing bitcoin, while the remaining 22.13 percent said that they did not pay off their credit card balances in full. This means that one in 25 bitcoin buyers carries the debt over to at least the next month.

As observers warn of a bubble, purchasing bitcoin – or other cryptocurrencies– on credit seems to be a risky proposition. And financing a cryptocurrency expenditure with ongoing debt is downright mad.

Some credit card companies have welcomed cryptocurrency customers with open arms. In a statement to CryptoCoin Rocket, a representative for American Express discussed the lender’s partnership with a peer-to-peer payments company to facilitate crypto transactions:

“In a similar way that our card members can link their card to certain digital wallets, they can also link their card to an Abra wallet and load a modest amount of money. The limit is $200 a day, up to $1,000 a month. Abra’s wallet can in turn be used to purchase bitcoin in US dollars.”

On the other hand, Capital One told CryptoCoin Rocket that it “has started declining credit card transactions to purchase cryptocurrency due to the limited mainstream acceptance and the elevated risks of fraud, loss, and volatility inherent in the cryptocurrency market.” A company spokesperson added, “Capital One continues to closely monitor developments in cryptocurrency markets and exchanges, and will regularly evaluate the decision as cryptocurrency markets evolve.”

One bitcoin investor who wished to remain anonymous said she considered buying bitcoin with her credit card because of the fraud protections that many companies offer. It’s unclear which companies would actually reimburse a customer for lost or stolen bitcoin.

An additional challenge for credit card companies looking to facilitate cryptocurrency purchases is that some customers might use international exchanges. If these exchanges lack appropriate KYC protocols or operate under false pretenses, then the credit card company might struggle to reverse fraudulent transactions.

Furthermore, the risk profile of cryptocurrency consumers as a whole might also give pause to major credit card companies.

Late last night, in a reddit post, a Coinbase staff person notified customers that some credit card companies are seeking to reclassify digital currency purchases as cash advances. Others confirmed receiving an email from the exchange.

If you are planning to buy the dip on credit, you may want to check in with your card’s customer service department.

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