Wells Fargo has joined the ranks of banks that have made it illegal to purchase cryptocurrency with their credit cards. Other banks like Chase, Bank of America or Citigroup are also following this trend, which restricts the purchase of cryptocurrency.
Although you can still buy crypto with debit cards (check with your bank for their policy), the ban on using credit cards to buy crypto has been a turning point. This is because these banks have led the way in imposing purchasing bans. It’s likely that soon this ban will be the norm.
Overnight purchases began to be cancelled when crypto was purchased with credit cards. Even people who have never had to deal with crypto before were able to purchase it. Volatility in cryptocurrency markets is the reason. Banks don’t want people to spend large amounts of money that could become difficult to pay back if the market crashes like it did at beginning of 2018.
Although these banks may miss out on the profits that can be made by people buying cryptocurrency and the market is growing, they appear to have decided that there are better options than taking a gamble with their credit cards. This protects the consumer by limiting their financial risk of getting into financial trouble if they use credit to purchase things that could make them credit-poor and cash poor.
Most crypto-investors who used credit cards to purchase cryptocurrency had only a short term goal. They didn’t intend to be in the business for the long-term. They wanted to get out of the market quickly and pay off the credit card before the high rates of interest. With the constant volatility in the cryptocurrency market, many people who bought with this goal in mind lost a significant amount of assets as a result of the market downturn. This is not good news for the banks as they now have to pay interest on their lost money. This was bad news for the banks. It also led to the current trend of banning credit card purchases that include crypto.
You should not max out your line of credit for crypto investment. Only a portion of your hard assets should be used to make crypto purchases. These funds should be funds you have the ability to keep for the long term without having to cut into your budget.
Don’t be tempted to cryptocurrency investing course when you don’t need it. Then, you might find yourself losing money due to a downturn. As banks explore this new investment frontier, they want to remind people of the old saying “Don’t gamble money you can afford to lose”.