Written by: JP Buntinx
There are many reasons why so many people use the Coinbase exchange. One of the main factors is that the company supports both credit and debit cards to buy Bitcoin and other supported currencies. Unfortunately, it seems there are some issues with these payment methods. A lot of customers have complained about extra charges when using a payment card on Coinbase. It seems such transactions are now considered “cash advances”, which is not a positive development.
USING A PAYMENT CARD ON COINBASE BECOMES MORE EXPENSIVE
Over the past few weeks, we have seen both Visa and Mastercard crack down on cryptocurrency-related activity. The suspension of debit cards issued by Wavecrest has sent shockwaves throughout the cryptocurrency community. According to Visa, the company has zero intention to facilitate or process cryptocurrency-related transactions. It seems that statement also applies to regular branded payment cards used on specific Bitcoin platforms.
More specifically, there are a lot of customers complaining about extra fees when buying cryptocurrencies on Coinbase. This mainly affects Bitcoin purchases, but it is certainly possible that purchasing altcoins could yield similar results. For some reason, using this exchange may now cost an additional 3% of the purchase price, even though Coinbase itself is not charging this fee. Instead, it seems both Visa and Mastercard have changed the “status” of Coinbase – and potentially other cryptocurrency exchanges – in their system.
According to one comment, it is possible that Coinbase is now considered to be a “cash advance” service. This means the Merchant Category Code of this company has been altered, which is pretty much on par with using a payment card for gambling. There is an additional surcharge of up to 3% for every single transaction, which will be charged to customers directly. It seems this issue has been present for at least 36 hours now, although the exchange has not issued any official comments regarding these complaints.
If both Visa and Mastercard are indeed charging customers extra to purchase cryptocurrency, a very worrisome situation is created. It is convenient to use a credit or debit card to buy cryptocurrency, but it was only a matter of time until this good thing would come to an end. Credit card issuers have smartened up when it comes to how their cards are being used. With neither Visa nor Mastercard being too keen on cryptocurrencies as a whole, decisions like these were bound to happen when Bitcoin and its consorts became too popular for their own good.
So far, it seems Coinbase is not aware of this situation, but they may start to investigate this matter soon enough. Card issuers such as Visa and Mastercard could classify all cryptocurrency exchanges as cash advance merchants, which would make buying cryptocurrency more expensive all over the world. If things get out of hand, the only option left to users will be wire transfers. Unfortunately, a lot of banks have been cracking down on this activity as well in recent months, which is another problem.
It is unclear if this situation only pertains to specific financial institutions. It seems safe to assume that Visa and Mastercard are themselves enforcing this new rule upon banks, although there has been no clarification in this regard. Regardless of who made this decision, it is evident the global crackdown on cryptocurrency activity is far from over. With major card issuers now turning their backs on Bitcoin and altcoins, it only shows how little control consumers have when it comes to using their money as they see fit.
My Thoughts
Follow @byscag on Steemit to get more opinions on crypto news and price.This doesn't necessarily come as all that much of a surprise to me, it was only a matter of time until they wanted their cut of the pie. But this just adds on to the already existing annoyance of fees when you purchase through coinbase.
My suggestion? Stop using this form of method unless you absolutely have to.
The recommended way is to still do the 0% fee trick using GDAX and a wire transfer to bitcoin. For those unfamiliar with this process I'll quickly outline the steps below for you.
Sign into coinbase.
Initiate a wire transfer to your USD wallet (will take a few days)
Once the money hits login to GDAX
Use your USD wallet from Coinbase to set a limit order for the coin you want on GDAX.
Enjoy your 0% fee transaction after it fills.
As far as these fees go, I wouldn't be surprised if this is just the start. Sooner or later the bank will also want their cut.
Another suggestion I would have. Make friends with people who either mine and/or have a lot of coins to spare. Bitcoin and cryptocurrencies were made to be peer to peer. If you know someone you trust, you can do the exchange between you two at an agreed upon price. This may be slightly different from the exchange, but all the power is in your hands.