Card Issuers Treat Crypto Purchases As Cash Advances

Card Issuers Treat Crypto Purchases As Cash Advances

If you are using Coinbase, there is a great chance you have received an email informing you that card issuers are already applying higher chargers on cryptocurrency purchases. From now on crypto purchases are treated as cash advances and the interest rates go up.

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If you are using Coinbase, there is a great chance you have received an email informing you that card issuers are already applying higher chargers on cryptocurrency purchases. From now on crypto purchases are treated as cash advances and the interest rates go up.

While Coinbase did not explicitly say which companies have changed their policies, Visa and Mastercard representatives had shed more light on the topic. Both companies claim that banks that issue the cards are responsible for any additional taxes and fees and that neither Mastercard nor Visa had ever changed their policies regarding cryptocurrencies.

In a Reddit post from the late January a “major credit card/bank employee” states that US and Canada citizens are affected by the changes.

Coinbase email clarifies that card issuers have changed the merchant category code (MCC) for digital currency purchases and this enables them to charge fees in advance. The exchange clarifies that card issuers collect the taxes, not Coinbase.

MCC is a specific code that enables banks and card companies understand whether their client is paying for gas, food, or clothes. In other words, each product category has its own merchant category code. Generally, cash advances are charged with higher interest rates and the annual rate might go up to 26.24%. For instance, a Visa card might tax the customer 10% of the transaction.

But why card issuers had taken this step? Many financial institutions are worried that the cryptocurrency market is facing a severe crash. Most crypto coins have been experiencing double-digit drops in the last few days and this may lead to gross losses among traders. There are reports of people mortgaging homes to invest in cryptos and this goes to show that the craze is slightly getting out of control. Institutions hope that the higher fees may potentially make investors ditch the idea of throwing their money out of the window.

Nevertheless, crypto trade is still available. To a great extent, newcomers might just switch from credit to debit cards and bank accounts. Coinbase accepts those payment methods, though they take more time to settle.

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