(TIM) — Recently, several major card issuers have banned cryptocurrency purchases with credit cards. While it can be easy to think that this is a move specifically to attack crypto, let’s not forget that debit card and bank transfer purchases are still allowed. So why ban credit cards? Well, there are three main reasons why card companies would be very hesitant to allow this sort of exchange.
1. Chargebacks when buying a one-way currency is a recipe for disaster
Credit card transactions can be reversed. Cryptocurrency cannot. Trading one for the other all but guarantees that there will be those trying to game the system by buying cryptocurrency and later performing a chargeback, essentially getting something for nothing. Because of this inherently disadvantageous setup, as well as the inability for banks or other authorities to reverse cryptocurrency transactions, card companies have a very strong disincentive to allow this kind of activity.
2. Market volatility offers a very real risk of default
In these crazy times of wild market fluctuations, incurring debt for the chance at making an easy profit provides a very real risk of being unable to pay said debt off at a later date. The cryptocurrency markets have tanked over 50% since Christmas, and odds are high that many prospective investors have maxed out their cards buying crypto, which had the effect of simply throwing away over half of it. This puts a lot of investors in a bad position to be paying off debt.
Card companies make their profit through customers never fully paying off their debt, sure, but they do have to at least make payments. A significant market collapse means that the ability of a speculator to make bills would be drastically reduced. In those circumstances, paying off the debt incurred by buying crypto may be the last item on the list.
3. The risk of exit from the credit system is also real
Building off that last bit about failure to make payments as an outcome to be avoided by card companies, there’s another unacceptable outcome: exit. Assuming an attempt to short fiat by buying cryptocurrency to pay back a loan denominated in fiat at a later date has been successful, the credit card debt will simply be paid off. At that point, the customer is likely to be lost. After all, why continue to maintain debt, which costs you money to maintain, after you’ve already made enough profits to not need it? If profiting from exiting the debt-based fiat currency system has provided financial independence, why go back?
This article was chosen for republication based on the interest of our readers. Anti-Media republishes stories from a number of other independent news sources. The views expressed in this article are the author’s own and do not reflect Anti-Media editorial policy.
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