Australians Should Not Use Credit Cards To Buy Cryptocurrencies

Post by Sharat on February 28, 2018 · Under credit cards · Comments Off on Australians Should Not Use Credit Cards To Buy Cryptocurrencies 

Towards the end of last year, the only thing everyone could talk about was Bitcoin which is unsurprising given the fact that in 2017 the value of Bitcoin rose from US$1,000 to just shy of $20,000. This means if you were lucky enough to have bought at the start of last year and sold at the high, you would have made a 1,900% return on your investment. Since Christmas much of the air has been let out of the price of Bitcoin but cryptocurrencies remain a hot topic amongst Australians throughout the country.

US and UK banks ban customers from using credit cards to purchase cryptocurrencies

Whilst the price of cryptocurrencies has fallen significantly from their 2017 highs this year, Australian investors (some would argue they are gamblers) continue to remain enthusiastic about their prospects. Banks however don’t feel the same way and some have started to ban the use of their credit cards to purchase cryptocurrencies such as Bitcoin. Major banks in the United States and the UK are leading the assault. JP Morgan Chase, Bank of America and Citigroup have all nixed the use of their cards for crypto purchases in the US. In the UK, Lloyds has also followed suit.

Major Australian banks have not made any decision

In Australia the big banks have not banned the use of their credit cards for crypto purchases though Virgin Money does not allow the practice. A spokesperson for the global financial services company says that after reviewing the situation the company confirms that Virgin Money credit card holders will not be allowed to use their cards to purchase crypto currencies.

Protecting people from themselves

The logic behind the ban is sound even if it is unfair that banks and card issuers are dictating to cardholders how they should use their cards. Cryptocurrencies underwent speculative mania last year sending prices soaring and many ordinary people believe prices will continue to rise despite recent declines this year. If people use debt to purchase cryptocurrencies and their value suddenly falls precipitously which is a real risk, they may well end up in a situation where they cannot pay what they owe.

Don’t borrow to speculate, only risk money you have

You should only be prepared to risk money you have and it is scary that so many people have financed purchases of cryptocurrencies through credit card debt. Australians really need to consider the soundness of such practices and consider alternative options for financing their investments in an asset which has no intrinsic value and whose price movement no one can predict. Banks imposed the ban after it became apparent that an increasing number of investors were using their cards to pay for cryptocurrency purchases on online exchanges. In fact, so many people were doing it, that international credit card transactions increased by 1 per cent.

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