Credit card companies look to reduce their exposure to the crypto market by classifying cryptocurrency purchases as cash advances.
Cash advance classification could lead to further declines in demand for cryptocurrency.
At least one Coinbase user says that he has received a refund of the cash advance.
If Coinbase is indeed refunding cash advance purchases, it could open the floodgates for not only Coinbase but crypto as a whole.
Recently, we've seen various reports all over the web surrounding the idea that credit card companies are cracking down on cryptocurrency purchases. It all started when reports started to surface stating that major banks like Bank of America (BAC), Capital One (COF), Citi (C), and JPMorgan Chase (JPM) all banned the purchase of cryptocurrency using their brands of credit cards.
However, cryptocurrency traders quickly learned that this supposed ban wasn't truly accurate. Instead of outright banning cryptocurrency purchases, credit card companies started to classify these purchases as cash advance transactions. This meant that cryptocurrency traders could use their credit cards to purchase these digital coins, but in the process would be charged added fees associated with cash advances.
In general, credit card companies charge cash advance fees of between 3% and 5% of the transaction or between $10 and $15, whichever is greater. So, ultimately, credit card companies hoped that this would deter their customers from using credit cards to purchase cryptos. Nonetheless, if they continued to do so, the added fees would hedge the risks associated with added exposure to the cryptocurrency market.
This Could Be Painful For The Crypto Market
Due to the dramatic rise in the prices of cryptocurrencies through the year 2017, many saw an opportunity in using their credit card to purchase these digital coins, then selling the coins, paying off their credit cards, and making a profit. While there is no telling what percentage of cryptocurrency is purchased using credit cards, we can imagine that credit cards account for a meaningful percentage of purchases.
Source: https://seekingalpha.com/article/4146757-coinbase-may-refunding-credit-card-cash-advance-fees-cryptocurrency-purchases
