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Anyone who hopes to purchase cryptocurrency with a Wells Fargo credit card will be out of luck. The bank recently announced a ban on the purchase of bitcoin and similar currencies using its credit cards.
Wells Fargo said the move was based on the various risks of the volatile investment, but the company said it would watch the issue as the market changes, according to CNBC. It’s the latest bank to join other big banks such as Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., and Capital One Financial in announcing restricting cryptocurrency purchases on credit cards. This move began in February with the companies citing credit and market risk concerns.
Discover Financial Services was ahead of the curve, prohibiting cryptocurrency credit card purchases back in 2015.
Repercussions of Cryptocurrencies
Banks have expressed fears about the repercussions of borrowers losing money from bitcoin including not receiving repayments from them, reported Bloomberg. With the cryptocurrency’s volatility, it’s a risk for banks to allow customers to purchase bitcoin on credit as there’s a danger someone can buy more cryptocurrency than they are able to afford and subsequently become unable to pay off their card. Should bitcoin’s valuation undergo a decline – which has already occurred this year – a bank’s chance to recover the money isn’t good.
As to the effect of the banks’ credit card bans for bitcoin purchases, a 2017 survey by LendEDU disclosed that around 18 percent of bitcoin buyers utilized credit cards for these purchases while 22 percent said they could not pay off their balances after buying the currency.
But there are more concerning statistics. Additional LendEDU data disclosed that 70.37 percent of its respondents who carried over their credit card balance said that owning bitcoin is worth the interest expense. A whopping 88.89 percent noted they planned to pay off their credit card bills from the proceeds received from selling their bitcoins.
To date, bitcoin is down approximately 50 percent in 2018 after 2017’s more than 1,300 percent rally, reaching nearly $20,000 last December. On June 11, bitcoin was trading around $6,720 after diving 10 percent last weekend. Since May, it’s incurred a 20 percent fall, according to CoinMarketCap.com.
Author: Debbie Baratz
Debbie Baratz has written about topics including personal finance, financial markets, and banking. And as a media relations professional, she spent 10+ years working at not-for-profit, private, and publicly-traded financial institutions. When Debbie isn’t working, she can be found working out, reading, or traveling.