Wells Fargo (NYSE:WFC) has joined several other banks in banning the use of credit cards to buy cryptocurrencies.
The announcement was made on Monday.
Here, we’ll discuss some of the details around Wells Fargo and other banks implementing these bans.
Wells Fargo’s announcement came on the heels of similar actions by other banks.
Already banning customers from being able to use their credit cards to buy cryptos are Citigroup (NYSE:C), Bank of America (NYSE:BAC), Commonwealth Bank of Australia, Lloyds Banking Group (LON:LLOY), which runs Halifax, Bank of Scotland, and MBNA.
Also, Capital One and Discover Financial Services (NYSE:DFS) no longer allow cryptocurrency purchases with their cards.
The financial institutions all seem to be using the same excuse as to why they are banning customers from buying cryptos with credit cards. They believe the space has too much volatility and credit risks.
Lenders have said they’re worried they’d be left on the hook if a borrower lost money due to a decline in a crypto’s price.
Then there’s the high percentage of fraud already plaguing the credit card industry.
An article penned by CoinLoop for Medium stated the following:
The truth is credit cards are the most fraud prone payment method on the planet with mass scale fraud a continually growing problem and credit card issuers don’t want to address it. In 2017, 78% percent of all reported online fraud involved credit card numbers.
We told you at the beginning of the year about a study that found that more people are using their credit cards and bank accounts to buy Bitcoin, but financial experts were warning that may not be a good idea.
An outfit called LendEDU polled 672 active Bitcoin investors and discovered that many of them are purchasing cryptos in an incredibly risk manner: incurring credit card debt.
In the previous article, we noted that people using their credit cards may be missing the point of investing. People should keep in mind that not only do you have to make your monthly payments, but also those payments come with interest.
With the volatility of Bitcoin, you should think long and hard about whipping out your credit card to buy cryptos. Going into debt just to own Bitcoin may not be the best idea.
With that being said, perhaps these bans are saving people from themselves when it comes to buying into the crypto space.
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