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Wells Fargo Bans Cryptocurrency Purchases on Its Credit Cards

• chollida1 8y ago
  A few Canadian banks did this back in December. If this upsets you view it through the lense of risk management than any sort of value judgement of crypto currencies. If the rate of charge backs starts climbing the issuing bank will take notice. Investing is not something that should be done on credit, especially for something with the volatility of crypto currencies. > A study conducted by LendEDU last year found that roughly 18 percent of Bitcoin investors used a credit card to fund the purchases. Of those, 22 percent couldn’t pay off their balance after buying the digital coin. This is just depressing:(
  • asdfman123 8y ago
    Betting on crypto with your credit card is a bad idea, full stop. But I remember in 2013, I read about someone who was planning on maxing out their credit cards to buy Bitcoin at $90. I was exhorting them not do it... Ha. I wonder how they fared.
    • WrtCdEvrydy 8y ago
      Same as me when I wanted to buy $20,000 at $230. Did not become a millionare...
      • asdfman123 8y ago
        The problem is you don't know when to sell it. A friend of mine got super lucky with crypto, though, because he lost his password. He bought Ethereum when it was being hyped on Kickstarter and mostly forgot about it. At the end of last year, he saw the price, freaked out, and figured out how to crack his own password. So, he ended up buying at the lowest point and selling at a very high point, like $700. I think he made a few million on it.
        • lozaning 8y ago
          $700 is closer to the midpoint of the historical price. Source: someone who should have sold at 1400 and joined the millionaire club.
        • nawitus 8y ago
          You can sell gradually.
          • oligopoly 8y ago
            Yeah that's the way you buy&sell stocks if you are investing. Not just gambling
            • bonestamp2 8y ago
              And buy gradually too for that matter. There's no way to time a peak/dip so this obviously spreads out your cost basis in case you're buying at the peak. You can also look at it as dollar cost averaging and continue to buy it as it goes down, again reducing your average cost.
          • notheguyouthink 8y ago
            Or you sell for what you need, when you need it. Ie, if I had the coin I was debating buying (~1k coins), I wouldn't remotely need to sell them all now. I could retire off a small amount of them, there's no need to sell them all. I'd sell what gets me retirement now, and hold onto the rest - see where it takes me.
            • lozaning 8y ago
              Im looking to dump most of what I have in favor of investing in multi family real-estate. I got big into mining eth starting back in the test net days. It's paid for some dumb stuff along the way to where I am now, chartered helicopters to Macau, laps around the Nürburgring, ect, but the price of all this shit has become so decoupled from the underlying technology and mostly scams at this point that I want to own something "real".
      • prepend 8y ago
        Same as my neighbor when ve wanted to buy $20,000 at $20,000. (Just wanted to add an example where the based saved some people)
    • behringer 8y ago
      I once aske my uncle his thoughts on investing in bitcoin in cash. Price was about 10 bucks a coin. We both regret talking ourselves out of it
      • codetrotter 8y ago
        There is no point in regretting such things. You could not have known what would happen to the price of Bitcoin. You probably would’ve ended up selling it for a tiny profit and then you’d still be regretting your actions, or even you could’ve panicked at some point when it dipped a little bit and sold at a loss.
        • 456hdsaq234g 8y ago
          or lost em in mtgox.
      • notheguyouthink 8y ago
        I was talking with my wife (then gf) about putting $1000 into BTC back when it hit $1. I don't let it eat me up though, I'm not a gambler, and it's quite likely that I would have sold at some point. Though.. if I had my wits, hopefully I'd be selling off chunks. Ie, at $18k/coin I wouldn't sell the whole thing.. though, at only $100/coin it would have been tempting. Ah, life.
        • charlesdm 8y ago
          But you'd likely be a lot better off. Putting $1,000 into something promising isn't gambling, it's smart. While no one likes throwing a grand away, it's also not a lot of money in the grand scheme of things. So why not take a chance? It's not like you'll see 20 opportunities to invest money into something pop up every year. People in general are too conservative. You should allow yourself to take (calculated) risks once in a while.
          • behringer 8y ago
            At the time it seemed like gambling. Everyone thought it would come crashing down at any time. It was the forward thinkers and the heavy risk takers that invested. On top of that, only crazy people ever though it could hit 20k.
    • bitL 8y ago
      They might hire you as one of their risk-averse financial advisers/asset managers next ;-)
      • asdfman123 8y ago
        Pay off your debt and invest in low cost index funds, kids. Max out your Roth IRA and 401k if possible. Feel free to Venmo me consulting fees.
    • gwbas1c 8y ago
      > Betting on crypto with your credit card is a bad idea, full stop. Because it's gambling, and a lot of the currencies won't work at scale, so it can be considered a 0-sum game. > But I remember in 2013, I read about someone who was planning on maxing out their credit cards to buy Bitcoin at $90. I was exhorting them not do it... Hindsight is always 20/20. If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height.
      • 0xfeba 8y ago
        > Hindsight is always 20/20. If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height. I worked as the sole IT person in a big (~300 computer) university department. My predecessor had placed folding@home (IIRC) on many of the lab computers. This was around 2009-2012. I removed it; he didn't have a "team" assigned or anything so I didn't think much of it. I didn't hear about cryptocurrency until late 2012, but occasionally the "what if" pops in my head and I go -- I could have put a lot of miners at 50% load -- even just at night and made quite a bit had I waited till the first boom (~2014), or lots if I held till now. Highly illegal, but unlikely to get caught. But that's a lot of "what-ifs", and it's all easy in hindsight. Useless to dwell on it, but hard not to sometimes!
      • userbinator 8y ago
        If I could go back in time I'd run the earliest Bitcoin miner on my PC for as long as it generated coins, and then sell them at the height. I know a few people who mined a few coins for "shits and giggles" and then lost/deleted them before the whole cryptocurrency thing really started going because they thought it would never happen. I might have had some at one point too.
    • cortesoft 8y ago
      I don't think they were saying they would buy it on credit, just that they would use their credit card to make the transaction (and then pay off the credit card at the end of the month). They are using the fraud protection part of their credit card, not the loaning money part.
    • hangonhn 8y ago
      I think that's the difficulty of being rational and prudent. A few lucky people will get lucky through chance alone. It doesn't mean the process was a good idea and the same is true of the reverse: you can have a great plan but sometimes chances get stacked against you. I loved the book "Fooled by Randomness". Well worth a read if you haven't. Your advice to your friend was sound. There's nothing to regret.
      • doublethink2 8y ago
        Nothing to regret? If he bought $5k of btc at $90 it would be worth over 300k, even after the crash. Yall are throwing your conservative investment advice at everyone and backwards validating your risk-adverse behavior.
    • rconti 8y ago
      shrug I bought my first Mac in 2002 as I was quitting my job to go back to college. It was immediately obvious to me that Apple was going places, and I was seriously tempted to buy as much Apple stock as I could swing. It would have paid off mightily. That said, I couldn't afford it. It was a bad decision for me then, so I'm glad I didn't make that decision. It was the right choice, even though it would have been very profitable.
      • CodeCube 8y ago
        The beauty of hindsight ... it's 20/20, let us never forget that :)
    • steveeq1 8y ago
      If you play russian roulette and "win", would you say that that was a good strategy? Would you do it again?
    • 3pt14159 8y ago
      I was broke in 2011 due to a founder flaking on a startup we were building. Discovered Bitcoin. Did the math, proved to myself it worked. Maxed the credit card with a cash advance, bought in person, then got a job to pay off the card. Just do the math. Don't listen to people and their hard and fast rules. If you think 200x or 1000x is possible just do it and make sure you take some off the table after it 4xes so you're always up.
      • s73v3r_ 8y ago
        I honestly don't see a thing different between your story, and someone who maxed out their card to bet on roulette.
        • doublethink2 8y ago
          Because you haven't thought about bitcoin and cryptocurrency enough and instead let others think for you. It's pretty easy to tell the difference between roulette and crypto - including the existence of a house third party.
          • s73v3r_ 8y ago
            Yes, because everyone who doesn't share your unicorns and rainbows vision of crypto clearly has not thought about it. It couldn't possibly be that there are people who disagree with you.
  • nomocrypto 8y ago
    To be totally fair, and I know I’m a data point of one, I bought some crypto currency on my credit card (about $75 worth) because I don’t really trust any of these exchanges not to screw up and leak my info, or screw up and charge me improperly. And it’s a lot easier to report a fraudulent credit card charge than get your money back. In fact, this follows my pattern of “buy everything on my credit card unless the merchant absolutely refuses to accept credit”.
    • ajross 8y ago
      > because I don’t really trust any of these exchanges And Wells Fargo agrees! To paraphrase you: you used your credit card because you felt the transaction was a risk and wanted to shift that risk onto another party. Banks don't like their legislatively-mandated fraud forgiveness being used as a risk buffer, and this is the tool they have in their box to deal with that.
      • mcherm 8y ago
        Actually, these are two different risks. nomocrypto is worried about the risk that the exchange will misuse his payment information to make bogus bank transfers; Wells Fargo is worried about the risk that nomocrypto will fail to pay back the card. The credit card issuers are not particularly worried about fraudulent "merchant" charges.
        • chimeracoder 8y ago
          > Wells Fargo is worried about the risk that nomocrypto will fail to pay back the card. The credit card issuers are not particularly worried about fraudulent "merchant" charges. Yes, they are different risks. But the issuer is still worried about fraudulent charges initiated by the merchant, in addition to the risk that nomocrypto will fail to pay off the balance.
          • abalone 8y ago
            > But the issuer is still worried about fraudulent charges initiated by the merchant Are they though? Generally the risk of merchant fraud is borne by that merchant's processor. There is some overhead for the issuer in processing chargebacks, but if this were an issue then we'd expect to see many other types of fraud-prone online merchants being banned. It seems clear that this is an extension of the common prohibitions on using credit cards for gambling.[1] But I should add that it's not that they're worried about failure to repay. That risk is generally controlled by credit limits. It's the fraudulent chargebacks that cardholders initiate when they lose their money. [1] https://www.creditcards.com/credit-card-news/10-things-credit-cards-wont-easily-buy-1267.php https://www.creditcards.com/credit-card-news/10-things-credi...
  • SilasX 8y ago
    Right, there are similar issues with porn and gambling -- people scream bloody murder about "don't judge me for that" but it's mainly an issue of the extra expenses from customers who swear up and down that "no, not me, I didn't buy that, please reverse the charges" and the processor having to investigate.
    • pentae 8y ago
      .. And make an absolute fortune on chargeback fees in the process. What problem?
  • jecxjo 8y ago
    I find it kind of ironic though. The risk of crypto currencies is too high, yet the company was ok with creating fake accounts that could totally have been used for fraud. More likely they are afraid that it will be a high cost for them with very little reward.
    • anarazel 8y ago
      > The risk of crypto currencies is too high > More likely they are afraid that it will be a high cost for them with very little reward. That, that, that is the same thing.
  • hectorr1 8y ago
    Everything else you buy on your credit card has an expected future value of $0.00. Why shouldn't you be able to buy things with arguably non-zero EFV as long as you are in good standing on interest and principal?
    • rm_-rf_slash 8y ago
      Eh, to be that guy on the internet, I’ll argue that when I’ve had to put things on credit, they’ve been done in service of a future higher income, like spending more time working on my degree than taking up a low-paying job to cover my present expenses. Buying investments of dubious value on credit though...isn’t this how the 20s ended?
      • dsp1234 8y ago
        Buying an investment of dubious value... Nope! Buying a non-investment of dubious value... Yes! Buying a different investment of dubious value... Yes! (commemorative coins, stamps, comics, beanie babies, etc)
      • RIMR 8y ago
        Just chiming in to say what really needs to be said here: If you use your credit card to pay for things you cannot afford, you are only doing yourself financial harm. Credit cards are for building credit, generating rewards, and short-term borrowing. If you are charging thousands of dollars to your credit card and planning to pay it back years later when you make more money, you're effectively just paying 1.5-2.0x the cost for everything you buy, because every year you are going to pay at least 15% in interest, and since you are spending more money than you make your debts will never go down. Don't borrow from your future self. It makes no sense, and there's literally no guarantee that you'll ever make more than you do right now.
    • ggggtez 8y ago
      You don't want to loan money to people who go broke. That's the thing credit card companies want to avoid the most. The whole point of the credit system is to prove that you are someone who pays back their debts. In this case, likely many otherwise reasonable people are all suddenly making bad investments before their credit history can catch up to it. The CC company wants to avoid that risk, and so bans that type of purchase to get ahead of it.
  • newnewpdro 8y ago
    > This is just depressing:( What about it is depressing, the bad credit these people now have? I doubt they were all actually broke, they just didn't pay off the debt because it's dumb. I'd find it depressing if the individuals actually paid it off... the sensibility of walking away and taking the bad credit is precisely why these credit companies are prohibiting this class of purchases. It's not a favorable scenario for the creditor.
    • deleted 8y ago
      [deleted]
  • njarboe 8y ago
    So, 4 percent of people buying Bitcoin are doing so on credit. Does not seem so depressing. Normalize by the amount invested and it probably drops to less than 1 percent.
    • andirk 8y ago
      Card swiping/virtual terminals are given at the discretion of the payment processors. Credit limits are at the discretion of the issuer, and are the ceiling of what they consider worth the risk. It sounds like the issuers, once again, had too high of a ceiling and then people defaulted. Very little to do with cryptocurrency.
  • TheSpiceIsLife 8y ago
    > Investing is not something that should be done on credit I suspect you mean in the specific case of gambling on cryptocurrencies with consumer credit. However, people purchase all sorts of investments on credit as a run of the mill occurrence. Houses, shares, forex. There are usually specific loose types for each investment type, purchasing a house on a consumer credit card would be fairly crazy.
    • StanislavPetrov 8y ago
      Not only that, if you trade options or other futures, you are literally required to trade on margin (credit).
    • TheSpiceIsLife 8y ago
      That's supposed to say "There are usually specific loan types...". Too late to edit.
  • astura 8y ago
    LendEDU is a shill site run by a student loan company that (probably) fabricated survey results. https://news.ycombinator.com/item?id=16926859 https://news.ycombinator.com/item?id=16926859
  • mrb 8y ago
    "22 percent couldn’t pay off their balance" Incorrect. Apparently a lot of users intentionally chose to not pay it. The original study (link: https://lendedu.com/blog/bitcoin-and-credit-cards/ https://lendedu.com/blog/bitcoin-and-credit-cards/) asked whether they did pay it off, not whether they could. See question #3 and #4. A crucial, but important difference that changes the interpretation of the study.
    • RIMR 8y ago
      I get what you're saying, but the vast majority of people who have not paid their debts aren't doing so intentionally. Why choses to owe more in interest when they can afford to pay the debt? I think in the absence of actual numbers, it's pretty irresponsible for you to assume that "a lot of users intentionally chose not to pay it", just because of the way the question was phrased. Sure, there were some people who just decided damage their credit and owe thousands in interest because they couldn't be bothered to pay their outstanding debts, despite being able to afford doing so. I would not expect this group of people to be substantial - certainly not "a lot of users".
      • charlesdm 8y ago
        In this case, if interest paid < yield. If someone wanted to give an SPV I controlled a loan tomorrow for a few million dollars to invest in crypto, at 20% a year, I would happily take it. But miracles sadly don't happen.
      • mrb 8y ago
        «Why choses to owe more in interest when they can afford to pay the debt?» Easy: they could expect to make more profits than the cost of interest. «I think in the absence of actual numbers...» In the absence of actual numbers, the journalist is simply jumping to conclusions by assuming everyone is unable to pay the debt.
        • RIMR 8y ago
          >Easy: they could expect to make more profits than the cost of interest. This is all anecdotal now. You took a semantic argument and you're running entirely too far with it now. >In the absence of actual numbers, the journalist is simply jumping to conclusions by assuming everyone is unable to pay the debt. Which is a fair assumption. If you zero cash, and $15k in debt, you will not be able to pay your debt. If you have $10k in cash, and $15k in debt, you are insane not to pay off as much of that debt as you can with that $10k, because the interest will keep accruing every month. People who fail to understand these concepts likely already have a terrible credit rating because they lack the common sense to avoid making bad decisions with debt.
  • RIMR 8y ago
    I only bought my crypto with credit because I wanted the reward points. I paid my bill off the same day my purchase cleared. Why can't we just use the existing credit reporting system to manage risk here? Those 22% of investors that were unable to pay off their debt can just suffer a blow to their credit score for irresponsible spending. Spending credit on crypto isn't a sign of risky behavior - spending more than you can pay off and failing to pay off what is owed is.
    • notyourwork 8y ago
      > Spending credit on crypto isn't a sign of risky behavior - It most certainly is if you cannot afford to pay it off after making the purchase. The get rich quick aspect of crypto enticed these people to leverage their credit card.
      • RIMR 8y ago
        Again, spending credit on crypto isn't the risky behavior. Borrowing money you cannot pay back is the risky behavior. Just because people were enticed by cryptocurrency doesn't mean that cryptocurrency is the problem. The problem is spending more money than you can afford to spend. We already have a system of checks and balances for this. If you borrow more money than you can pay back, you take a hit on your credit that can last years, and banks will trust you less in the future for your high-risk behavior. Anyone with a credit card should be able to use their line of credit to purchase anything they please - your history of paying the debt back is all that really should matter, not what you spent the money on.
        • notahacker 8y ago
          Your history of paying the debt back is likely to change for the worse if you're buying some shitcoin with the expectation of reselling at a profit rather than budgeting for repayments from your salary like if you'd bought food or a sofa. Credit card companies have an interest in not supporting behaviour which makes clients a higher risk than their current credit rating would suggest, and that includes not funding gambling or investment products. Especially where the product class is also disproportionately likely to be used as a means of converting a stolen card to untraceable cash and disproportionately likely to be subject to merchant fraud. The overlap between the set of people who "invest" beyond their means in cryptocurrency and the set of people with so little grasp of risk management they express views like "anyone with a credit card should be able to use their line of credit to purchase anything they please" is of course another strong reason for them not to want to touch crypto with a bargepole...
  • dalbasal 8y ago
    Take stats like this with a grain of salt. The can easily be tortured into saying what you want. I wonder how many couldn't pay their balance at the end of the month regardless. I mean, it is a rolling credit system. A lot of people only ever pay the minimum. If they are truly doing this to protect vulnerable customers, that's great. It'd be a rare occurrence though. Credit cards are basically designed to sneak credit into people's lives, by merging it with a payment method.
    • rconti 8y ago
      They're doing this to protect themselves, and by proxy, their customers. Incentives are aligned.
  • jstanley 8y ago
    > view it through the lense of risk management than any sort of value judgement of crypto currencies. That a third party is involved in deciding whether or not a purchase is too "risky" to allow is precisely why I want to move to cryptocurrency instead of banking.
    • lostlogin 8y ago
      You’re missing the point. They were spending the banks money, not their own, and they are struggling to pay it back. How will you raise money for investing from a crypto?
      • wolco 8y ago
        They are spending their own money the same way you would be if you bought a tv.
        • Hendrikto 8y ago
          Not when the transaction is happening. The bank will charge you later. If many people can’t actually pay at that point, the bank will loose.
        • lostlogin 8y ago
          Apply that to crypto. When your balance is zero, how do you get a tv?
    • krschultz 8y ago
      Have you never canceled a fraudulent charge or had the credit card company flag something that you didn't purchase?
      • jstanley 8y ago
        Literally never.
    • implicit 8y ago
      When you use a credit card to buy something, you are borrowing money. It is entirely reasonable that your would-be creditors can refuse to lend you money for certain kinds of purchases.
  • pentae 8y ago
    Sorry, since when did credit card companies start discouraging reckless spending behaviour? This is dimension C-137 right?
    • deleted 8y ago
      [deleted]
  • tomjen3 8y ago
    Well yes, but is it any worse than people who use credit cards to fund "retail therapy"?
    • kar40 8y ago
      I don't think 22 percent of those taking 'retail therapy' are defaulting.
  • jacquesm 8y ago
    > Investing is not something that should be done on credit That's how the real fortunes are made. Invest on credit, reap the profits if it works, leave the credit supplier holding the bag if it doesn't. Rinse, repeat until you hit a live one.
    • bdcravens 8y ago
      When Bitcoin was increasing 10-25% a month, makes total sense to max out your credit and pay off your balance the next month. Not sure if this was a risk-tolerant move, or just a risk-ignorant move. > That's how the real fortunes are made. Invest on credit, reap the profits if it works, leave the credit supplier holding the bag if it doesn't. Not all debt is created equal however. Credit card charge-offs can trash your FICO score, and I suspect many who are using credit card debt to fund "investments" are more highly dependent on their consumer credit than those buying real estate with house money.
      • RIMR 8y ago
        >When Bitcoin was increasing 10-25% a month, makes total sense to max out your credit and pay off your balance the next month. Not sure if this was a risk-tolerant move, or just a risk-ignorant move. No it didn't! There was no guarantee that the value was going to keep going up! If you invested like it was a guarantee of profit, you absolutely should never ever invest - even if you managed to profit off of BTC. Remember, for every person buying Bitcoin because the price was going up, there was somebody else selling it because they thought the price was likely to drop. In a speculative market, you cannot look back at past performance and declare it "makes total sense" for everyone to have had invested recklessly during that time period. You'll likely use that same excuse to invest wildly again later when it looks like a sure-bet again, and if you're wrong (as many people have been in crypto markets) you stand to lose a massive amount of your net worth in the process.
        • bdcravens 8y ago
          I think the voice of my comment didn't come across properly, but if you read the 2nd half, I was trying to express my cynicism about that position. That's why I referred to it as "risk ignorant".
  • StanislavPetrov 8y ago
    >If this upsets you view it through the lense of risk management than any sort of value judgement of crypto currencies. Personally I view it through the lens of a being a customer. If Wells Fargo doesn't support payment for as wide a range of goods and services as a different bank, then I will close my Wells Fargo account and take my business elsewhere. They are perfectly within their rights to offer whatever services they want, and I'm perfectly within my rights to reject their substandard offer and accept a more flexible offer.
  • tomkarlo 8y ago
    I suspect this is less about the credit risk of the cardholders than the risk of unrecoverable fraud, although there's also the theoretical risk of some kind of fraudulent conveyance by the card holder. Fraud: I steal someone's credit card and use it to buy crypto, then move that currency somewhere unrecoverable. The card company is unable to recover anything. (This can be mitigated by recovering from the exchange in some cases.) Fraudulent conveyance: Holder maxes out all their credit cards buying crypto, hides it, then claims bankruptcy. Card companies can't recover anything. (Yes, you could do this with something like gold, but it would be a lot harder to hide and sell later on.)
  • bitcoinisqueen 8y ago
    Why is it depressing? What is the % of people that bought smokes, alcohol and other harmful substances.... and could not pay back? What about the % of people that bought iPhones on credit and could not pay it back? The number needs to be taken as a comparison to other purchases (it is Credit after all) to see whether it is higher or lower than the typical credit card purchase. At least with crypto (or any forex) you have purchasing power vs. Buying over priced meals, useless gadgets and drugs such as coffee, wine or cigarettes
  • monochromatic 8y ago
    > 18 percent of Bitcoin investors used a credit card to fund the purchases Nothing wrong with that. > Of those, 22 percent couldn’t pay off their balance after buying the digital coin Ohhhh no.
  • tluyben2 8y ago
    If they don’t trust people to decide what to spend their credit on, they should not get credit cards in the first place imho.
• philip1209 8y ago
  On the surface, this looks bad. But, the underlying logic - that Wells Fargo doesn't want to loan you money so that you can buy money - seems reasonable to me. If you have cash in a Wells Fargo checking account, you can still buy cryptocurrency with it.
  • ddtaylor 8y ago
    IMO it's less about the people borrowing money and more about the potential fraud.
    • Broken_Hippo 8y ago
      I think you are correct. After all, many credit cards have a cash advance feature that will allow you to borrow money to get money. Similar restrictions are commonplace for things like money orders, western union, and prepaid credit cards.
      • vxNsr 8y ago
        In fact citi is posting some of the transactions as cash advances.
    • Bud 8y ago
      Just as an illustration, the fraud risk is so bad that someone as smart as Steve Wozniak had bitcoins stolen via simple fraud. https://www.marketwatch.com/story/steve-wozniak-had-70000-in-bitcoin-stolen-after-falling-for-a-simple-yet-perfect-scam-2018-02-28 https://www.marketwatch.com/story/steve-wozniak-had-70000-in...
      • gruez 8y ago
        just because Wozniak is a good programmers, doesn't mean he automatically knows how to secure cryptocurrency. a fairer comparison would be if a cybersecurity expert's coins got stolen.
        • 8y ago
• jeromegv 8y ago
  Pretty sure they don't allow you to buy Forex or investment funds or a mortgage on the credit card either.
• ddtaylor 8y ago
  There are so many problems with mixing credit cards and crypto-currencies. Many entire companies in the space have been killed or forced to pivot drastically because of it.
• aitrean 8y ago
  Banks are doing this from a perspective of risk management. But I will bet any number of Bitcoin that crypto nerds will construe this as a narrative that the big banks are attacking them once again.
  • himom 8y ago
    There are multiple potential explanations. I think disallowing commerce without an agreeable substitute, like immediately transferring or escrowing money from other accounts, is an unacceptable inconvenience. Often times, a person wants the protection of a credit card, while having sufficient assets to purchase in cash or repay the card corp. If anything, that a debit card lacks similar protections of a credit card is absurd and inconvenient per skimming and missing fringe benefits like travel insurance.
    • aitrean 8y ago
      Debit and credit are the only methods for commerce with almost any third party. Transferring and escrow payments require direct channels that Wells Fargo does not want to negotiate. Regardless of differences between debit and credit, debit is at least backed by direct account balances. Credit is not. Chargebacks would also be a nightmare for credit cards. Even if it's deemed unacceptable to disallow over-risked services like credit cards to purchase cryptocurrency, then the beauty is that cryptocurrency purchasers can migrate their loans, and savings to another banking provider who will service the headache of credit-backed cryptocurrency investments.
  • lapnitnelav 8y ago
    Banks are in the business of risk management. They apply that to money, but ultimately, they are all about that risk.
• rubberroad 8y ago
  USAA just did this a few weeks ago. My knee-jerk response was to be upset, but then I read the arguments regarding creditors retaining the right to determine what is purchased with said credit, as well as the implications for whether cryptocurrency would be considered a cash advance.
  • deleted 8y ago
    [deleted]
  • FLUX-YOU 8y ago
    Cryptocurrency definitely needs to be a cash advance, otherwise you can abuse % cash back and other benefits with it (reddit.com/r/churning). I don't think it's been possible to do it for a while though. But TBH they probably do it because cash advance has a higher APR.
    • mjcl 8y ago
      > But TBH they probably do it because cash advance has a higher APR. Which seems reasonable to me — if someone is at the point they need to borrow cash from a credit card, they’re probably a higher risk of default.
    • wccrawford 8y ago
      I'm pretty sure all the credit cards I've had had cash advance at a higher APR and it started accruing immediately, instead of in 30 days. It really only makes sense to use it in an emergency and if you don't have your bank card to use instead.
    • adrr 8y ago
      Cash advance higher APR is to mitigate the extra risk of people using debt to pay for debt and the increased risk of default. The bank isn't losing money on the cashback feature of a credit card. They are splitting the interchange with the customer. The vendor/merchant is the one paying 2.4% of the transaction.
    • unethical_ban 8y ago
      Off-topic, but I find churning at least as ethical as banks promoting the accumulation of debt with paltry benefits/kickback to consumers for earning Visa/MC money with transaction fees. Abuse is the credit system and its marketing writ large.
• jedberg 8y ago
  For those of you who are worried this is a value judgement, just remember that banks are in the risk management business. They generally allow any transaction until they start seeing risk in it through their own data. What this tells me is that there have probably been a lot of chargebacks related to cryptocurrency as the coins have fallen and people are trying to make up their loss by putting on "the evil bank". I would actually give props to Wells for being the last major bank to ban it.
• asdsa5325 8y ago
  Good guy bank just trying to protect customers from fraud. edit: downvoted by cryptodorks mad about their losses ;)
  • 456hdsaq234g 8y ago
    Not sure about WF being 'good guy bank'...
  • Sohcahtoa82 8y ago
    No, you're getting downvoted because Wells Fargo themselves have committed fraud against their customers. https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal https://en.wikipedia.org/wiki/Wells_Fargo_account_fraud_scan... I really hope your comment was just a joke that is being poorly received.
• oneplane 8y ago
  My first reaction was: why do they mess with what people do with their money. Then I remembered that the way credit cards are used in a lot of places is not actually the money of the account holder. Where I live, debit cards are the standard, and credit is rarely used, rarely accepted, and rarely something you can endlessly lend with. SO when I read "Bank X wants to mess with transactions Y" in my context it's like someone telling you what you can do with your money, but since it's credit, not debit, it's the bank's money and it's pretty reasonable that they get to say what you can use it on.
  • pezdeath 8y ago
    In the US if you have your finances in order there is 0 reason not to use a credit card on everything (where you aren't charged extra to do so) as most credit cards offer a rewards system. For example I have a card that rewards 1.5% back on every purchase and I have it setup to pay in full at the end of every month. Doing this allows me to never pay interest but basically get a 1.5% discount on every purchase.
    • wccrawford 8y ago
      Finances in order and have the willpower not to spend money you don't have, just because you can. Some people lack that, and it's smarter for them to just avoid the constant temptation by now having a credit card.
      • derefr 8y ago
        Is there a secured card with cash back? Seems like a good option for such people.
        • astura 8y ago
          Discover has a secured card that earns cash back.
        • 15155 8y ago
          Charge cards offer great cash back but are not "secured." You can absolutely spend money you do not have, but only for one month, and then your account is closed and probably hit with massive fees.
• floatingatoll 8y ago
  If people who bought soda had a 22% default rate, Wells Fargo would ban soda purchases. They don’t care about blockchains, they care about carried balance interest and non-defaulted balances.
  • maddyboo 8y ago
    Are there any other historical instances of banks banning a specific type of purchase from CCs?
    • dmoy 8y ago
      Mutual funds / stocks / index funds.
    • tmpz22 8y ago
      I used to play a specific MMO which had to completely change its gameplay because scammers in the community were using stolen cards to buy bulk game subscriptions, lead to chargebacks and credit cards threatening to ban their primary means of monetization.
    • jaredklewis 8y ago
      Casino chips, online gambling of just about any kind, stocks, money orders, lottery tickets, and mortgage payments all basically can't be made with credit cards. There are some banks that have blocked pornography and medical marijuana purchases. But basically, the pattern is clear: banks don't want to lend you money to make investments. Banning money orders is a natural extension of that because you can then go use that cash for the aforementioned things. That makes a lot of sense, because if banks did want to make those investments, they don't need you. If a bank wants to invest in stocks, property, or a game of roulette, they can just go put their money there, no credit card customer required. What banks can’t do without lending you money is get a little slice of your paycheck every month through interest payments. This is a separate asset class than things like stocks.
      • glitcher 8y ago
• stealthmodeclan 8y ago
  It seems like this one is one of the better banks, at least they didn't ban it as a kneejerk without using their data to support this decision.
  • maym86 8y ago
    They are not great. They recently committed mass systematic fraud on their own customers by creating unwanted accounts and charging people for them. https://en.m.wikipedia.org/wiki/Wells_Fargo_account_fraud_scandal https://en.m.wikipedia.org/wiki/Wells_Fargo_account_fraud_sc...
  • deleted 8y ago
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  • Sohcahtoa82 8y ago
    Uh...Wells Fargo is probably one of the worst banks out there. To the point where anybody still banking with them probably hasn't been paying attention.
    • stallmanite 8y ago
      Hey I saw on TV that they "re-established" themselves in 2018. Seems legit. /s
• zer00eyz 8y ago
  This is a problem, a large one. What prevents wells from saying "I don't want to pay for your wedding because you might get divorced?" What prevents them from saying "no you can't have a cash advance in country XXX because the exchange rate is volatile?" There is an established remedy for this and it is by removing the ability for exchanges to process cards. Or process them as cash advances.
  • dahdum 8y ago
    There is a large push to get credit card companies to ban firearm purchases, and Citigroup dropped merchants selling them IIRC.
  • freeone3000 8y ago
    The first: Irrelevant, the money's going to be gone regardless. This is the type of purchase you have credit cards. The second: That's actually a thing. Cash advances aren't guaranteed to be available, they're charged at a higher rate, and mine can only be used to get CAD or USD, not anything else. You already can't buy stocks, bonds, or options with a Wells credit card. This is putting crypto in the same bucket as other securities.
    • zer00eyz 8y ago
      You can't trade forex either, but those are all considered securities. That would be illegal. BTC isn't considered a security - https://coincenter.org/link/sec-chairman-clayton-bitcoin-is-not-a-security https://coincenter.org/link/sec-chairman-clayton-bitcoin-is-... No matter how you slice it this is the card provider making an arbitrary call, one that should be made at the processor level. Further down someone points out a bank banned the purchase of guns. Let me be clear that I have no love of americas relationship with firearms. But to decide that a CC can't be used to make an otherwise legal purchase is the beginning of a bad thing. As we become more cashless banks need to be more neutral in their dealings.
      • freeone3000 8y ago
        If your argument is that bitcoin is not a security because it's a currency and that it continues to fall under SEC virtual currency guidelines, then wouldn't buying bitcoin be a forex transaction?
• sacnayak 8y ago
  Doesn't Warren Buffet have a huge stake in Wells Fargo?
• kodablah 8y ago
  The righteousness of the decision notwithstanding, this doesn't really seem like the time for Wells Fargo to exercise large-bank leverage by instituting new rules. I'd let the rest of the industry go first here (granted some have).
• java_script 8y ago
  This is good for Bitcoin.
• karakot 8y ago
  I'm sure you can't buy stocks with credit cards either.
• simplecomplex 8y ago
  This might be to prevent a cash back loophole. Most banks don’t allow getting cash from a credit account. The cash back loophole works like this: buy crypto on coinbase with credit card, then immediately sell and transfer to checking account.
  • imhoguy 8y ago
    Exactly this. Also some bank customers may buy (crypto)cash declare bankrupcy and their crypto assets will be unreachable to any debt collector or law enforcement.
• dick_sucker2 8y ago
  Some companies want consumers to use cryptocurrencies to avoid dealing with payment processors. It seems strange to involve credit cards with cryptocurrency. A wire transfer to Gemini is fast and easy.
• youdontknowtho 8y ago
  Didn't Wells Fargo get in trouble a couple of years ago for laundering money for Mexican drug cartels?
  • astura 8y ago
    No, that was HSBC.
• devin 8y ago
  Buying other instruments with your card has been against the terms for awhile on most cards, IIRC. I was surprised credit card companies allowed the purchase of cryptocurrency in the first place.
• knodi 8y ago
  People should ban Wells Fargo for stealing peoples identity and opening up fake accounts in their name.
• deleted 8y ago
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• Animats 8y ago
  That make sense. You can't, in general, buy money with a credit card.
  • gringoDan 8y ago
    You often can take money out of ATMs but you get hit with large cash advance interest rates (and the interest clock starts ticking the moment you take the money out, not when the bill is due). Most banks were already coding crypto purchases as cash advances.
• yani 8y ago
  My guess is that the friendly fraud rate in crypto is way way too high. People really like to abuse this.
• w0rd-driven 8y ago
  I ran into this December 2017 when I went to transfer funds to Coinbase. To be a little fair, coinbase had a series of more than one charge and refund. When I initiated this verification, Wells Fargo alerted me to the activity via text and allowed the transaction to be authorized. To this day, no other transaction on that spending account has ever presented itself in this manner. Due to the disjointed nature and possibly stability issues at the time this process failed hard. What did work was a wire transfer. This was a $30 fee paid to Wells Fargo and on top of the $10 fee from Coinbase, making it cost $280 to credit my account with $240. Wells Fargo took 3x the fee and the conspiracy theorist in me believes this is their primary motivator for doing this. You can get your money out to do what you want with it, but not without a steeper penalty than the exchange. Now that this stance is official and if I hadn't lost money (to take a simple view, that $240 is now worth around $75) I'd be looking to open another account somewhere that doesn't try to tell me how to use my money. When I realize this other account at whatever mythical bank is somehow superior in every way, I would ditch them completely. It doesn't seem like the greatest move on their part but they could also be counting on the fact that I may never do this because of the hassle involved with changing everything over.
  • gr2020 8y ago
    Many (most?) banks charge an outgoing wire fee. That $30 fee is probably the same whether you’re trying to wire $250 or $250,000, and is probably unrelated to _where_ you’re wiring the money to.
• Torwald 8y ago
  It comes down to the question what kind of financial services they want to provide. What people are doing is to use those cards as speculation devices. You enter a game of speculation, using your card depth as speculation matter against the crypto currency. It's simple currency speculation, nothing new, nothing special. But, is this what Wells Fargo wants to enable / service with the specific product "credit card"? It's a matter of product line-up hygiene on the side of Wells Fargo.
• dogruck 8y ago
  Don’t forget the political risks of accepting crypto credit card transactions. I can see the post-crash Senate panel now: Senator: what volume did you process? Bank CEO: about $800M, madam. Senator: $800M. And that didn’t concern you? Bank CEO: well it was within parameters, madam Senator: let me read you a letter from a single mother who bought $2000 of coins... Etc.
• XalvinX 8y ago
  An odd business decision. I mean, you can withdraw cash at casino ATMs in Vegas, I know because I've (unfortunately) done it. You can use credit cards for addictive stuff like 976 numbers too. Or to buy liquor. Or whatever else. So, it makes one think they are being influenced from outside or above (if you consider the Fed to be 'above'). I remember as an irresponsible college student getting checks for $6000 at the beginning of each semester too....and banks setting up stands on campus handing out credit cards to students (who clearly couldn't have had real jobs) like so much candy. Banks have long promoted irresponsible behavior, and clearly must profit off it. I mean come on.
  • greggarious 8y ago
    >ou can withdraw cash at casino ATMs in Vegas, I know because I've (unfortunately) done it Consider a bank that refunds ATM fees. I've withdrawn at casinos with boggling ATM fees ranging from 5.00 to 8.75 (!!). My bank has always refunded these charges. There are several online only banks that have found it's cheaper to refund ATM fees than to maintain a branch network... Charles Schwab has been good for me so far.
• kevin_thibedeau 8y ago
  The banks shouldn't be allowed to promulgate an electronic economy based on credit cards that they massively profit from and then turn around and arbitrarily rescind the credit they have put out to use. If they want to mitigate their risk they should bring debit cards up to the same level of fraud protection that credit cards enjoy. Instead we get the Zelle shitshow that only a fool would use.
• crb002 8y ago
  Of course for a mere 6% one time processing fee Wells Fargo will offer to sell you BTC from your bank account.
• greggarious 8y ago
  >Lenders have said they’re worried they’d be left on the hook if a borrower lost money on a digital currency bet and couldn’t repay. Weird, isn't the whole point of setting a credit limit that you assess how much risk a given person can sustain? Seems to me like banks want to hand out high credit limits to entire overspending, under the assumption they can make their money back twice - through reposession + obscenely high APRs in the 25%+ range. Meanwhile, every time I go to a casino ATM I see prominent signage on how to use one's credit card to obtain casino credit. They don't block these transactions, they just factor the existence into the calculations for a credit line...
  • root_axis 8y ago
    > they just factor the existence into the calculations for a credit line... That is very misleading. They "allow" casino transactions in the form of cash advances, not directly to the card as someone might infer from the way you constructed that sentence. The reason this detail is important is because a cash advance can be used to buy blockchain tokens just as easily as it could be used to buy casino tokens, and they're both relegated to the cash advance scenario for the same reasons.
• himom 8y ago
  My family dumped Wells Fargo after being with them for 5 decades. They can go straight to hell to tell me or anyone what they can and can’t buy when you have a trackrecord of paying on-time and sufficient liquidity to back up a transaction. I can understand the appearance of hedging without a capitalized margin account. Perhaps an alternative, the bank could communicate “we need to reserve X% of funds now to cover this transaction or we’ll have to cancel it.”
• Keeeeeeeks 8y ago
  I'm glad that this discussion is peppered with the words "charge back" and "fraud". People speaking out of their element about "banks censoring their competitors" probably haven't been on the receiving side of a frivolous charge back, lost the dispute, and been SOL for it. Crypto companies could default to push payments and/or micro-deposits for verifying ownership of a fiat instrument, but people want their coins now and that causes friction, which shrinks user activation funnels. Anyone using a fiat on-ramp to accept payments (including exchanges) has agreements with Visa/Mastercard/AMEX/their bank to keep their charge back ratios under 1%, or else Visa/MC/the bank processing their fiat transactions will fire them (good luck running a business accepting fiat without access to the card networks or a bank). Bank fraud analysts probably have their own bank-side metrics/reasoning to give customers the benefit of the doubt. For example, if the fraud analyst sides with a merchant and denies filing a friendly fraud (maliciously filed) dispute, maybe the customer complains to their manager, and takes whatever sympathy-inducing narrative to social media, which would get an analyst fired and make a bank look even less sympathetic. Through that, it's too easy for someone to maliciously load up on 2+ months of purchases, walk to their bank, state "I've never heard of Bitcoin someone hacked me and bought $6k in crypto I need that back", and win. It's not worth the headache until/unless banks and exchanges bridge the gap and determine a means of: 1. Confirming the exchange isn't providing liquidity to money launderers 2. Confirming with the bank that the KYC info requested sufficiently fulfills #1 3. Confirming with the bank that the KYC and payment instrument info (if fiat) requested sufficiently provides evidence that the owner of the instrument authorized the payment.
• bitcoinisqueen 8y ago
  To all people who think this is about 'risk management some questions to ponder: - how is buying a currency like the Bolivar allowed (50,000% plus inflation) - coinbase limits purchases to about $100/USD per week...how much risk is really being exposed? - why is buying depreciating liabilities such as computers, software, harmful drugs (smokes, alcohol, coffee) and overpriced meals and fashion accessories acceptable? (Doesn't alcohol hinder purchasers health and make it harder to pay back due to death and other problems?) -Where was their "risk management" when they socialized their bets in the 2008 crash? - why do they keep extending lines of credit to the USA gov for the purchase and sales of billions of dollars of yearly foreign arms sales? Now, considering that bitcoin is MEANT to replace banks as its modulus operandi and enable p2p transactions (ie: cutting out middlemen - banks!).... it becomes apparent what they are really doing: trying to stop the leviathon and holding onto their business model. Observe their actions, not their words and then their intentions will become clear.
  • deleted 8y ago
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• davesque 8y ago
  Keep in mind that debit cards can still be used to purchase crypto. I see a lot of potential for blockchain tech in the long term but I think people should not be looking at crypto holdings as an investment strategy. This seems like a reasonable move by WF to me. They only want you to use money that you actually have to engage in high-risk investments. Otherwise, they stand to lose a lot when their customers can't cover their balances.
• anoncoward111 8y ago
  So the argument from the bank here involves 1) customers defaulting on loans and 2) disputes + chargebacks Question, I might default on my purchase of diapers for my baby. Someone might also fraudulently purchase diapers for their baby using my credit card. Should these purchases be banned by cc companies as well?
  • s73v3r_ 8y ago
    No, because it doesn't happen in nearly the same rates.
    • anoncoward111 8y ago
      Ok, so what you're saying then is that a bank should be allowed to discriminate based on our purchases, and that if we don't like it, either use debit or cash, which come with some flaws/inconveniences. How about instead of allowing to discriminate based on purchases, they just accept slightly smaller margins?
• joshfraser 8y ago
  I don't blame them. Cryptocurrency offers fast finality while credit cards offer chargebacks up to 90 days. Those two things don't mix well.
• awad 8y ago
  At best, this thread seems to reveal a disconnect between consumer expectations and the mindset of banks issuing credit cards. That is, I am reading that some consumers of credit cards feel entitled to spend however they so wish on their cards so long as they can pay it back, whereas the reality is banks view credit cards as a product with which they may attach terms of service like any other product. Without aligning these two factors, people that are actually spending someone else's money will feel wronged when they are not allowed to, without also keeping in mind that banks these days being huge integrated conglomerates DO offer credit for investing in the form of other credit products.