Coinbase, the cryptocurrency startup, announced Tuesday (Feb. 13) that it disabled the ability for customers to add new credit cards as a payment method for those in the U.S.
In a blog post, the company said debit cards are unaffected by this change, which was prompted by the realization that it can’t ensure customers that they will have a successful experience purchasing cryptocurrency via credit card. In recent weeks credit card companies have said they are banning the use of their cards to purchase digital tokens.
“We know many customers have added credit cards as their primary payment method; we did not make this decision lightly. We are actively working with card networks and card issuers to find a long-term solution,” Coinbase wrote on its corporate blog. “For customers in the UK, EU, Canada, Australia, and Singapore, we are collecting feedback and evaluating similar changes.” For customers that have a credit card linked to their Coinbase account, they can continue to make purchases, granted the credit card issuer allows it. Coinbase warned the bank could charge cash advance fees for using it to buy cryptocurrencies. To avoid that, Coinbase said, U.S. customers should switch their payment method to debit card or a bank account
Citigroup said earlier in February that it will no longer allow credit card customers to purchase bitcoin with a credit card issued by Citigroup. “We will continue to review our policy as this market evolves,” said a bank spokeswoman told The Wall Street Journal. Meanwhile, Bank of America and JPMorgan Chase said they, too, wouldn’t allow customers to purchase bitcoin with their credit cards anymore. According to The Wall Street Journal, banks are growing more worried about the risks associated with customers using their credit cards to purchase cryptocurrency, namely bitcoin. A big concern is that bitcoin purchases will result in more card losses for the companies. Another concern is that credit card companies will have more fraud losses as a result of customers using them for bitcoin purchases. When there is fraud, it’s the card issuer and/or the merchant that takes the hit. With more exchanges selling bitcoin, there is an increased risk of fraud for the credit card companies. Capital One has been preventing customers from doing that since January, while Discover Financial banned it back in 2015.