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Buying Cryptocurrency with Credit Cards now Attracts Extra Fees


Buying Cryptocurrency with Credit Cards now Attracts Extra Fees

Coinbase, a leading cryptocurrency exchange, have alerted some of its customers on February 1, that credit card issuers now charge fees on crypto purchases.

One of the most significant digital currency exchanges Coinbase has informed some of its users that buying bitcoin and other cryptocurrencies with their credit card is no longer ‘business as usual,’ as these card issuers have started charging fees on Blockchain-based virtual currency purchases via credit cards.

The exchange, which is the one most connected with retail investors sent an email to a few of its customers, telling them that credit card networks now treat buying of cryptos as cash advances, which attracts fees and higher interest rates on transactions.

According to Investopedia, Coinbase did not mention any particular credit card company and also declined to make any further comments on the matter.

Credit card giants, Mastercard wrote in an email through its spokesman that:

“Over the past few weeks, we have clarified to acquirers – the merchant’s bank – the right transaction or merchant category to use for these type of transaction (Cryptocurrency purchases). This provides a consistent view of such purchases for both merchants and issuers.”

As quoted in Investopedia, Visa did not keep mute over the issue; their representative said via voicemail, “It would be up to the individual issuer, the financial institution that issued the card, to determine any fees that they might charge for certain types of purchases, so it’s not Visa. We don’t issue cards.”


A Reddit user who claimed to be working with a major credit card firm stated on the social media platform in late January that Visa and Mastercard customers were already suffering from this adverse change. Some parts of the post read:

“Coinbase has been coded as a cash advance with Visa and Mastercard Transactions. This is impacting the US and Canada (so far as am aware should be any Visa and Mastercard transaction though).”

The user further added, “PLEASE BE AWARE DEBIT CARD PURCHASES MAY HAVE A NON-insert bank here FEE).”

The Reason For the Charges

Coinbase also wrote in the email that:

“Recently, the MCC code for digital currency purchases was changed by a number of major credit card networks. The new code will allow banks and card issuers to charge additional cash advance fees. These fees are not charged or collected by Coinbase.”

MCC simply means Merchant Category Code. Card firms like Mastercard and Visa use MCCs to categorize vendors. Credit card merchants charge extra fees and higher interest rates for cash advances. For example, one issuer charges an additional $10 or five percentof the transaction, and the yearly interest rate is at 26.24 percent instead of the usual range of 16.24 to 24.99 percent for regular purchases.

Experts say credit card issuers have taken these steps to cushion the effect a possible downturn in the price of bitcoin and other cryptocurrencies could have on them since it could spark a wave of defaults.

On the other hand, there’s also a possibility that card issuers are just extracting exorbitant fees from FOMO inspired buying.

It’s in the best interest of Bitcoiners and altcoin investors to employ other means of payment to avoid being unnecessarily exploited. Crypto taxation is already enough burden, and there is no point adding another.

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