Visa and Mastercard and now making it more difficult for their customers to purchase cryptocurrency by slapping additional fees on transactions. This month, Bitcoin investors using Coinbase noticed additional fees on bank statements and were like, wait what?
Turns out, the credit card companies decided to reclassify cryptocurrency transaction type from “purchase” to “cash advance.”
Coinbase confirmed the change in an email to its customers, noting “the MCC code for digital currency purchases was changed by a number of the major credit card networks.”
A Mastercard spokesperson claimed the change “provides a consistent view of such purchases for both merchants and issuers.”
This means an additional five percent fee is slapped on to every transaction from the credit card company in addition to the four percent credit card processing fee Coinbase already passes on to its users.
Right now, if you want to buy Bitcoin or other cryptocurrencies instantly, your only option is using a credit or debit card. Transferring funds from your bank can take days, and since crypto prices can change in an instant, this isn’t a great option. Although there are lower fees for transferring funds via ACH, investors may get stung by fluctuating prices.
So basically, you’re going to use a credit or debit card for efficiency, but Visa and Mastercard want to make this harder on you. Unlike purchases, transactions labeled as “cash advances” don’t fall under an interest-free grace period. As soon as the purchase goes through, it accrues and compounds daily, so that’s pretty neat.
In addition to the new fee, cash advances carry higher interest rates as well.
Adding insult to injury, using a card for crypto purchases does not earn credit card points.
The card companies are equivocating bitcoin to withdrawing money from an ATM. This conflicts with the IRS’s stance that bitcoin is not currency, but rather taxable property.
Until everyone gets their stories straight, investors get stuck in the middle with more barriers to purchasing crypto, and conflicting regulation and processes.
And for Visa and Mastercard, that’s kind of the point. Their aim is to slow the rush of investment, even at the risk of losing potential millions in additional revenue. Assuming Bitcoin and other cryptocurrency don’t total crash and burn, eventually financial middlemen like credit card companies will be cut out of the picture.