At some point during the last week, both VISA and Mastercard chose to reclassify Bitcoin transactions as "cash advances" - as opposed to purchases.
While some have cited the move as a response to the fact that "the rise of bitcoin and future cryptocurrency is tied to the eventual fall of financial middlemen like Visa and Mastercard", the re-classification comes after several banks, including Bank of America, JPMorgan Chase, and Lloyds, have all banned virtual currency purchases via credit card.
People can of course still buy cryptocurrency by transferring bank funds, but that is a relatively slow method.
Now, it seems VISA and Mastercard have quietly reclassified the way Coinbase credit card purchases are processed on their networks.
Transactions to purchase Bitcoin and all other cryptocurrency are now considered cash advances and therefore subject to the "varying fees" that come with that.
From now on though when doing business on Coinbase or whatever exchange you may use be prepared to pay a 5% fee to your credit card merchant as well as the 4% service fee to the exchange. The moment the Coinbase purchase goes through, the transaction accrues and compounds daily. Essentially the same as using a credit card to take cash out of an ATM, the interest rates for a cash advance are significantly higher and can be up to 25.99%. They will also no longer count toward earning any card points.
This means that charges applied to any cryptocurrency purchase using your major credit card will equal 10% plus interest.
Most exchanges levy a fee on credit or debit card transactions, Coinbase, for example, charged a 4% transaction fee. It will become more hard for investors to purchase bitcoin and other cryptocurrency on their terms. In a world where cryptocurrency prices can swing wildly in either direction, a week feels like a nail-biting eternity.
MasterCard said it had over the past few weeks "clarified" to exchanges' banks which transaction or merchant category code they should be using for cryptocurrency purchases. "This provides a consistent view of such purchases for both merchants and issuers".
In the United States, cryptocurrency is now treated by the IRS as a taxable property.
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