The credit card companies are now clamping down on the use of credit cards to purchase bitcoin and other cryptocurrencies. At the latest count Bank of America, Citigroup, J.P. Morgan, Discovery, Capital one and others are now starting to issue bans on using credit cards to purchased bitcoin. MasterCard in Australia has re-categorised the purchase of bitcoin as a cash withdrawal and imposes a 50 AUD fine on using their credit card to buy bitcoin.
A recent survey by LewndEDU of bitcoin investors used a credit card to purchase bitcoin. This comes from a recent survey showed that less than one-fifth (18.15 percent) of all bitcoin buyers are using credit cards to buy bitcoin, of those just over 20 percent did not pay off their credit card balance immediately. These figures are quite low in that the average credit card debt is around 3600 dollars and most do not pay off their debt in full anyway. So fears of an increase in unpaid credit card by bitcoin investors seem to be unfounded.
According to www.creditcards.com, “The Federal Reserve, which runs the national banking system, is a natural place to start looking for the average credit card balance. The Fed's monthly G.19 Consumer Credit report -- drawn from banks' lending reports -- shows revolving debt of $880 billion in July 2014. Divided by the U.S. Census Bureau's estimate of the U.S. adult population in 2013 of about 242.5 million people, that comes to just over $3,600 each.” It goes on, “However, the revolving debt category includes bank loans and finance company loans other than credit cards, and many people over 18 do not have a credit card. Adjusting for the fraction of adults who do not have a card, the per person balance is about $5,121.” Consequently, the amount of credit card debit as a result of usage in bitcoin purchase is minimal by comparison to overall usage.
Therefore there must be another reason for the sudden abrupt ‘ban’ on using credit cards for bitcoin. A number of bank (predictably) have started it is the fear of money laundering. However the amount of money laundering using cryptocurrency is infinitesimally small compared to the money laundering that has been established to occur using the traditional banking system and for that small amount of money laundering that may be occurring in cryptocurrency transactions, if it was fully banned the money laundering that IS occurring with crypto currencies would simply revert back to traditional banking. So that is not a reason for curbing the purchase of bitcoin by credit card.
As this is looking more like a concerted effort by central banks to counter bitcoin it seems more probable that it is simply attempts to reduce the influence of bitcoin on the banking fraternity before it gets big enough to significantly replace much of the banking influence and control of the economy. It is often touted that bitcoin has no ‘asset back or government backing or guarantee.’ This also is not particularly valid when you consider the dollar, and other currencies, have no asset backing since the removal of the gold standard and have suffered a serious deterioration in value over the years since.
Whereas once 50 years ago a dollar value of an ounce of gold would purchase say, a man’s good quality suit, one can still today purchase a good quality suit for an ounce of gold but the amount of dollars required to purchase that gold has fallen by over 90 percent. Not a good recommendation for using fiat currency. Moreover money is an idea backed by confidence and current inflation rates over the past 30 years shows an eroding confidence in the value of fiat currency. Inflation for the past 50 years has run at 633%, an average of 4.06 percent per annum. If you go back to 1950 it is 916 percent. (www.in2013dollars.com/)
Hence bitcoin rising to fill the gap and doing, in fact the direct opposite, increasing in value against the dollar. And hence the central banks desire to see it go away. Understandable then it is that the Central Banks are fighting for their survival.
Getting back to credit cards, Exchanges such as Coinbase, for example, will be the ones that initially suffer the most as much of their income is credit card derived. However it is likely that alternatives will be used more and ways around the ‘ban’ will be found, pretty much as they always have been. Drawing cash from a credit card and using that bank to bank is a potential option. Finding a friendly bank, such as in Panama is another potential option and using that to transfer funds by credit card and then from there to an exchange is another option. I am sure many people with much imagination will find other ways.
In short the ‘banning’ of using credit cards to purchase bitcoin is just a hiccup and the intention to curb or make it impossible to purchase invest and or use or sell bitcoin will go unfulfilled.