Banks like to act like they are here to serve the people but it’s just not the reality. They are here to serve themselves. Which is understandable and I am not exactly against that, such is capitalism. However the constant posturing and marketing as institutions that are looking out for their customers best interests is nauseating.
When the news of credit cards being banned for cryptocurrency purchases I was shocked, I had always assumed that purchases on credit cards for cryptocurrencies would register as a ‘cash advance’. My reasoning was that in the past when I had deposited money into my sports betting account (legal in Australia) via credit card I was always charged a cash advance, which comes with a nasty interest rate. Interestingly enough, only a few banking institutions in Australia will not allow you to use your credit card for deposits into sports betting accounts. Which begs the question; What are the banks really trying to achieve with their bans on credit card cryptocurrency purchases, seeing as they are happy to let you literally gamble with your money as long as you pay the cash advance fee. Australia’s largest bank the Commonwealth Bank of Australia noted their reasoning as:
“Due to the unregulated and highly volatile nature of virtual currencies, customers will no longer be able to use their CommBank credit cards to buy virtual currencies. This will come into effect as of 14 February 2018.”>
Many banks across the world echoed similar reasonings for their banning of credit card crypto purchases. I have read a lot of people supporting the stance taken by banks as “It’s their money they are lending you, they have no obligation to lend you money”. While this is true, I don’t believe for one second banks are concerned about consumer welfare or credit risk. In my opinion this is a classic case of a defensive manoeuvre by an industry that is under serious threat of disruption.
Let's not forget what Bank of America had to say about cryptocurrency:
"Clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies.">
While a majority of banks still allow purchases via debit cards/savings accounts, the banning of credit card purchases was designed to take some momentum out of the rising popularity of cryptocurrency. Banks could not afford the backlash of a blanket ban given the competitive nature of the industry, thus went for the next best thing.
Credit cards have always been lucrative products for banks to shove down the throats of consumers, especially with declining interest margins on mortgages. Balance transfers, loyalty programs, interest free periods and cashbacks are just a number of marketing tools banks use to lure customers into credit cards. Max out your credit card? No problem they will increase your limit. Go over your limit and can’t afford to pay it back? No problem they will charge you even more interest.
Why are banks all of a sudden worried about what you purchase on your credit card? Have banks ever cared when their customers were blowing thousands of dollars on non-critical goods? When someone who is living beyond their means purchased a $3,000 TV on their credit card did banks care? What is the “volatility” in the purchase of non-critical goods? None because they are products with zero financial return, yet somehow banks don’t care about that.
Speaking of volatility, I’m sure you bank will be happy to lend you money for a margin account on equities/derivatives, after all they are regulated and stable right?!?!:
Once you understand the nature of banks it is easy to see straight through their marketing gimmicks. Banks are not in the business of losing power, therefore your can be sure their actions will ensure they use all available tools to them to protect their market share. The ones that understand cryptocurrency and encourage adoption will see the benefit in the future.
What do you think about the current state of banking?
Disclaimer: This is my personal opinion and not financial advice. Please do your own research when investing.
