Why have banks banned the purchase of cryptocurrencies using their credit cards?

The wave of banks banning cryptocurrency purchases using their credit cards is growing, with Wells Fargo now included in this type of ban. A number of other banks, such as Chase, Bank of America, Citigroup and others, are also part of this new trend to restrict cryptocurrency purchases.

It appears that debit cards can still be used to buy cryptocurrencies (check with your bank to be sure of their policy), but using credit cards to buy cryptocurrencies has taken a turn with these banks leading the way in these purchase bans, and it probably won’t be long before this ban becomes standard.

Seemingly overnight, purchases began to be canceled when credit cards were used to purchase cryptocurrencies, and people who had never had a problem before buying cryptocurrencies with their credit cards began to notice that they were no longer allowed to make these purchases. The culprit is volatility in the cryptocurrency market, and banks don’t want people to spend a lot of money that will become a struggle to get back if there is a big cryptocurrency crash like the one at the beginning of the year.

Of course, these banks will also miss out on the money they’ll make when people buy cryptocurrencies and the market takes off, but they’ve clearly decided that the bad outweighs the good when it comes to gambling with their credit cards. This also protects the consumer by limiting their ability to get into financial trouble by using a loan to buy something that could leave them cash and credit poor.

Most investors who used credit cards to buy cryptocurrencies were probably looking for short-term gains and didn’t plan to stick with it for the long haul. They were hoping to get in and out quickly and then pay off their credit cards before the high interest rates kicked in. But with the constant volatility of the cryptocurrency market, many who bought with this plan in mind have found themselves losing huge amounts of assets as the market falls. Now they are paying interest on the lost money, which is never a good thing. This, of course, was bad news for banks, and caused the current and growing trend of banning cryptocurrency purchases with credit cards.

The lesson here is that you should never max out your crypto investment line of credit, but only use a percentage of your hard assets to buy cryptocurrencies. These funds should be funds that you can lock in for the long haul without hurting your budget.

So don’t get caught putting money into a cryptocurrency you’ll soon need only to find that the crisis has taken money out of your pocket. There’s an old saying, “Don’t gamble money you can’t afford to lose,” and that’s a lesson banks want people to learn as they venture into this new investment frontier.