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Why Have Banks Prohibited Cryptocurrency Purchases With Credit Cards?

The number of banks that have banned the purchase of bitcoin with credit cards is growing, with Wells Fargo joining the list. A number of other institutions, including Chase, Bank of America, Citigroup, and others, have joined this new trend of banning crypto purchases.

It appears that debit cards can still be used to buy cryptocurrency (check with your bank to be sure), but credit card purchases have taken a turn, with these banks leading the way with these purchasing prohibitions, and it won’t be long until this ban becomes the norm.

People who had never had any issue buying bitcoin with their credit cards before began to discover that they were no longer being able to make these purchases. The reason for this is bitcoin market volatility, and banks don’t want individuals to spend a lot of money that will be difficult to repay if a significant cryptocurrency fall occurs, as it did at the start of the year.

Of course, these banks will miss out on the money that may be generated when individuals buy bitcoin and the market rises, but they appear to have determined that the risk outweighs the reward when it comes to this credit card bet. This also safeguards the consumer by limiting their capacity to go into financial difficulties by using credit to purchase something that may leave them cash and credit-deficient.

Most investors who bought cryptocurrency with credit cards were presumably hoping for quick profits and had no intention of staying in for the long haul. They intended to get in and out quickly so they could pay off their credit cards before the hefty interest rates kicked in. However, because to the ongoing volatility of the cryptocurrency market, many people who had invested with this strategy in mind found themselves losing a significant amount of money when the market crashed. They’re now paying interest on money they don’t have, which is never a good thing. Of course, this was bad news for the banks, and it resulted in the present and growing trend of prohibiting cryptocurrency purchases using credit cards.

The takeaway here is that you should never spend all of your credit card limit to invest in cryptocurrency, and that you should only utilize a portion of your hard assets to make crypto transactions. These should be monies that you can set aside for the long term without jeopardizing your financial situation.

So, don’t get caught placing money into bitcoin that you’ll need in the near future only to discover that a downturn has snatched money from your wallet. “Don’t gamble with money you can’t afford to lose,” says an old adage, and that is the lesson banks want consumers to learn as they enter this new investment frontier.

What do you think?

Written by Trevanna Gordon

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