Credit-Card Companies to Add to Bitcoin Investors' Misery
February 03 2018 - 4:51PM
Dow Jones News
By AnnaMaria Andriotis
More credit-card issuers are ditching bitcoin.
Three of the largest banks in the U.S. said Friday that they
would no longer permit credit-card customers to buy bitcoin with
their credit cards. The decisions were announced after a brutal
week for bitcoin prices, which have plummeted more than 50% from
their peak in December.
Citigroup Inc. said late Friday that it has decided to no longer
permit its credit card customers to buy bitcoin with their Citi
credit cards. The bank is in the process of implementing the block,
which will apply to Citi credit-card holders globally. "We will
continue to review our policy as this market evolves," said a bank
spokeswoman.
The bank joins JPMorgan Chase & Co. and Bank of America
Corp., which earlier Friday also said they won't allow credit-card
customers to use credit cards to buy bitcoin.
The Wall Street Journal reported on Jan. 25 that banks were
becoming concerned about the risks associated with credit cards
being used to purchase bitcoin. Capital One Financial Corp.
prohibited credit-card purchases of bitcoin in January and Discover
Financial Services banned them in 2015.
With the latest announcements, most top credit-card issuers by
volume won't allow bitcoin purchases. One of the biggest concerns
for banks is that bitcoin purchases will push up their card losses.
That includes cardholders who don't pay their bills when the price
of bitcoin falls below what they paid to buy it with the card.
The price of bitcoin rose to about $9,300 in weekend trading
after falling about 20% for the week ended Friday.
Overall credit-card charge-offs are on the rise because of
several factors, including looser underwriting standards in recent
years. That has investors concerned because losses are up during a
relatively strong economy when unemployment is low. Some banks have
taken steps to slow down the pace at which losses are rising -- but
bitcoin card purchases could complicate those efforts.
Fraud losses are also a top concern for card issuers.
Credit-card holders typically aren't responsible for fraudulent
purchases on their cards. Those costs are often shouldered by the
issuer or the merchant where the transaction occurred. But as more
exchanges emerge that sell cryptocurrencies, some card issuers say
there is a higher risk of card holders buying bitcoin from a
fraudulent merchant. Cardholders would then contest the purchase
with the issuer, which could likely result in the card issuer
writing off that purchase as a loss.
Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com
(END) Dow Jones Newswires
February 03, 2018 16:36 ET (21:36 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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