But I can still place bets on race horses and football matches with my credit card?
Makes total sense.
Lloyds bank has stopped credit card customers from buying bitcoin, amid concerns of a credit risk surrounding the cryptocurrency's rapidly falling value. Coming into effect today, the ban applies to Lloyds Bank, Bank of Scotland, Halifax and MBNA. The currency has grown exponentially in the last year, peaking at $20,000 (£14, …
When you place a bet, the money has to come from and go to the casino etc. Guess who also banks with the banks?
So win/loose, bust or pay out, the bank still gets their fees, and both the casino and the bank manage the "risk" of you winning or loosing so that neither is ever really out of pocket (unless they get the maths wrong, or too greedy).
However, they currently don't know the odds with bitcoin... much less all the other undesirable possible outcomes and changes in the law regarding those bits of coin.
> But I can still place bets on race horses and football matches with my credit card
> > Because there's a reasonable chance of you winning those bets.
Also, the bank will start to charge interest immediately for any thing spent on gambling, as it does for credit card cash withdrawals from an ATM - no interest fee period for an initial month
Most of the things you buy with a credit card will have no value after purchase, or go down in value. If you buy a week long luxury trip for $20,000, after that week it is worth zero - certainly less than bitcoin no matter how much further it falls. Most goods you buy will depreciate, some right out of the gate (diamond ring) and some after a little while (giant screen TV)
Buying something that maintains its value or even has a chance of going up in value is the exception, not the rule, for credit card purchases.
I'm not talking about a cruise going bankrupt before you can take it. I'm talking about it being valueless AFTER YOU'VE TAKEN IT. The credit card company can't "repossess" a service, it is always valueless to the credit card company unless they can prove the service was never provided and can issue a chargeback. They can't issue a chargeback to a cruise company because I took a cruise and then couldn't pay my credit card bill.
Once you have taken your cruise, it cannot magically loose value. You went on the cruise, it had value.
Ticket items do change in value, and CC companies may not cover/respect such value *before* it has been used: "What isn’t covered:
In some cases, if you buy a ‘flight only’ from a third party, such as a travel agent, you might not be able to make a claim because the third party was only contracted to provide the tickets and not the flight."
Again, if the Cruise company does not deliver, you could be able to claim back your fees via the credit card directly, etc. But with Bitcoin (or the above quote, a "third party"), the Credit card company cannot look for any value/item/store to "chargeback".
Really, they don't give "money" away on a *credit* card. They give (around) 30 days credit and a lot of stores have to wait for their payment in 30 or more days!
What you may be thinking of is a "cash advance", and nothing stops you doing one of those with a credit card and then using debit transfer.
I think the distinction is credit vs debit. If you want to use your money to make a "risky" investment then go nuts, it's your money.
If you want to borrow my money to make that investment then I reserve the right to decide not to lend you my money. And a credit card is a loan at the end of the day.
Now, the problem that Lloyds have is that having said they'll do it for bitcoin, the immediate follow up question is why haven't they done it for all these other things (like the previously mentioned gambling).
It's only true to a point though. I do know of credit card providers pulling the plug on people who gamble "excessively" and not reinstating them until bills are paid and proper assurances received.
At the end of the day, like it or not, a credit card allows you to spend someone else's money. That someone else therefore is allowed to say what you can or cannot spend that money on. And who knows, maybe this is the catalyst which drives credit card providers to stop people from using them in book makers or casinos*.
And it's worth reinforcing that no-one is stopping from spending your own money on any crypto-transation that you want**
* A perfectly reasonable idea in my opinion
** Or potentially your gambling
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But a loan without preconditions on purchase. As wolftone points out, one can use a credit card to gamble.
Out of curiosity, I have just checked the terms and conditions of my credit card, which is not Lloyds.
Yes, you can gamble, but they treat this as a money advance, not as a credit transaction. Same as if you'd used it to take money out. IIRC, this means they charge you an arm and a leg in interest from the date of the transaction.
They may also refuse a transaction if "the merchant involved falls within a category that we have determined poses a high risk of not providing the goods or services you are expecting". I guess all they have to say is that Bitcoin dealing falls within that category.
Finally, though it hasn't been mentioned yet, one of the things that they must be worried about is people applying for refunds under Section 75 of the Consumer Credit Act. When you buy something between £100 and £30K on the credit card and receive unsatisfactory goods or services, you may claim against the card issuer if the merchant doesn't resolve the situation. Quite possibly this wouldn't apply to people who had lost money on Bitcoin, but the banks may as well save themselves from the hassle of having to respond formally to such claims.
On Cash advances?
No it's not. withdraw cash from an ATM on your credit card and expect it to be a lot higher.
That's what he's saying, many CC companies treat money going to paddy power or ladbrookes whoever not as a credit card transaction, but the same as a cash withdrawal. £££charges£££
"Investments may go down as well as up etc. What if someone wants to use their card to buy a load of "investment" wine?"
Let's think about that for a moment.
If the money stays within the classical financial establishment (ideally within the UK financial establishment), where's the problem, even if (especially if?) it's large quantities of money going to an organisation that isn't competing in any real way with the (UK) financial establishment?
Cryptocurrencies, on the other hand... well, I'm sure readers can work it out.
Btw, I personally wouldn't touch crypto currencies with a bargepole, but I would be very happy indeed if more people had a genuine alternative to the UK financial institutions.
I'm guessing this is a problem in the Mastercard/Visa community that they cannot handle and hence some banks are dumping it on their customers.
I've had money back from CC payments traders that have gone bust. That's part of the comfortable guarantee you get on many payments that could go wrong and why many of us choose to use a CC rather than a Debit card without protection.
That leaves the CC company exposed when they are guaranteeing an unstable and wobbly set of cryptocurrency exchanges who are taking money for something that doesn't exist and whose belief it does exist and have value could disappear overnight. Its not like Ladbrokes or BetFred who are always the winners in the betting world because their 'book' is all too real. So ideally it should have been Mastercard/Visa refusing to deal with exchanges - in which case the customer is not offered the opportunity to buy rather than deny.
But I guess the exchanges will always find some CC company willing to give them an account. After all they will make money unless the bubble bursts. And if only 1% believe it won't - its enough.
Somehow I'm not uncomfortable with Lloyd's decision. Nor do I think their shareholders. Or anyone seeking to protect the taxpayer - as we are there not to profit but to pay up when the financial world drops a bollock.
"They wouldn't let you buy a meal at a restaurant with it, because the meal - which you've just eaten - is already valueless when you pay for it."
Depends on how much fertilizer sells for in your neck of the woods. Though yeah, you do have to wait a while for that value to come out, so just call it an investment for the future.
Off the top of my head a number of reasons:
a) These are credit card transactions, so its more a question of what are they prepared to lend against. If there has been a run up in these, they might suddenly worry that they have a large increase in lending (against which there is very dubious security)
b) There are considerable concerns about crypto currencies from a money laundering / proceeds of crime perspective (see news articles on people not being able to use profits to buy a house, etc...). Directors can go to jail if they dont try and prevent money laundering.
c) there could easily have been a spike in card related fraud - get card details, buy bitcoin, transfer to another wallet, cash out. They might have seen a big spike in claims for these.
To be clear, I dont know if any of the above are the reason, but they'd all be pretty reasonable - and with the exception of the money laundering point would also be consistent with allowing debit cards to continue.
" Directors can go to jail if they dont try and prevent money laundering. "
If you have any example of this, I'd be really impressed.
As an example, HSBC admitted it was laundering cash for the Mexican cartels, paid the (at the time) biggest fine (1.6 beeeelion IIRC) and then..... nothing. No criminal charges against anyone in the organisation, no resignations, no suspension of banking licence, nadda.
If you have any evidence of any banker (or director) going to jail for failing to prevent money laundering I'd love to see it.
Banks primarily make money on the interest they charge on loans. Banks are like any other business. If they think that letting their clientes use cryptocurrency in their transactions is riskier, then they will not let that happen. Is their choise of business. And if a client is not happy, they can get another bank to do that. (btw, not defending banques)
"What if someone wants to use their card to buy a load of "investment" wine?" ......
Well when the sentiment about the wine changes and people decide it's not a good wine you do still have the bottle which has "some" intrinsic value if only to piss in. With Bitcoin once the sentiment is that they are worth nothing, that is precisely all you have left.
But when will people finally realize that Bitcoin is worthless? A little before 6PM tomorrow.
"With [fiat money] once the sentiment is that they are worth nothing, that is precisely all you have left."
Excuse me sonny boy, but that's the way the whole computer-generated 'fiat money' system  works and has done for ages. Not just cryptocurrencies. See e.g. Black Wednesday (16 Sep 1992).
The difference is that the legacy banksters don't want anyone who isn't "one of them" (ie anyone without a banking licence) to be able to create money out of thin air. See e.g. Bank of Dave (aka Burnley Savings and Loan, as seen on TV) or even as far back as Galbraith's "Money: Whence It Came, Where It Went" book, back in the day when BBC TV had informative programmes as well as entertainment.
 http://www.dummies.com/personal-finance/investing/how-the-fiat-system-works/ grossly oversimplified, but there's more detailed stuff elsewhere. See also: fractional reserve banking.
> ... that's the way the whole computer-generated 'fiat money' system works ...
It's the way all money systems work, in fact, nothing to do with computers at all. I don't believe there are any currencies in significant use that are not fiat money.
Once you move away from barter - either in the time domain ("here's some gold, give me a sack of flour once it's been milled") or to promissory notes ("I promise to owe the bearer on demand") - you're relying almost entirely on the agreement of some group of people as to the value of your currency.
"when will people finally realize that Bitcoin is worthless?"
When it can't be exchanged for good or services, until then it has worth.
I've bought a graphics card and a monitor with bitcoin, so it must have been worth something to the retailer.
The folly of individuals notwithstanding...
When did banks get to tell their customers what they can and cannot buy?
Investments may go down as well as up etc. What if someone wants to use their card to buy a load of "investment" wine? Sorry, mate you've had enough?
Banks and financial institutions do generally take some steps to ascertain whether they are likely to get their money back if they lend it to you though, and decline to lend to you if the risk is deemed too high. The calculation here is clearly that anyone moronic enough to be buying bitcoins on credit is by definition too high a risk to give credit to.
"When did banks get to tell their customers what they can and cannot buy?"
They're not. They're just saying you have to use your own money. A credit card is an unsecured loan. Until you settle your credit card bill it's the bank's money. It's not unreasonable to say you can't use their money to make what they consider a risky investment.
"Until you settle your credit card bill it's the bank's money. It's not unreasonable to say you can't use their money to make what they consider a risky investment."
Where is this "money" of which you speak? All I see in what you describe is numbers in a computer owned and operated by a group of thieves in suits with a banking licence.
When did banks get to tell their customers what they can and cannot buy?
For ages. Last year I tried to withdraw £2,500 from my current account (HSBC) at my regular (big town) branch - there was hugely in excess of that in the account (and a decent sum in the associated savings account) - but they refused point blank until I could "prove" what I wanted the cash for. I've banked with them since they were the "Listening Bank". I even went to school with the cashier!! It was pretty bloody annoying, I can tell you.
I'm far from the only one to have suffered from this - look online, you'll be amazed.
The banks hate cash or anything they can't control themselves.
In fact banks are wary of large cash transactions because such transactions are likely (not certainly, but likely) to be associated with crime. And they work under legislation such that if they are suspicious that this is happening then *they are legally liable* for it. So they tend to be very paranoid about such things. So they tend to require all sorts of evidence that they money is not being used for anything bad (where 'bad' includes 'tax evasion by buying things for cash', for instance: it's not just drugs &c) so they can demonstrate to the government that they did the due diligence.
You might prefer they did not do this, but I am quite pleased they do.
You must have some pretty crazy laws over there in the UK. I've never had problems withdrawing sums far larger than that in cash from my bank. They need to file a form with the government if you withdraw more than $10,000 in cash I believe, but they (at least the credit union I bank at) doesn't stop you from taking it.
I'd switch banks if I was ever denied being able to withdraw such a paltry sum!
I would expect if the credit card companies become aware of significant illegal online purchases then the businesses involved would be placed on the 'Terminated Merchant Account' credit card blacklist.
"So the credit card companies admit that they can control what people buy or don't buy with their product?"
It is a loan.
The bank doesn't have to lend you money; it can decide you are a bad credit risk. It can decide what loans can be used for (in the early days of credit cards they could not be used for hire purchase agreements, for instance.) This doesn't make it an accessory to anything. If it decides that spending money on X affects your credit rating, whether it's hookers, cocaine, Bitcoin or bulk Toblerone, it can refuse to lend you money for that purpose, reduce your card limit or terminate your card.
"Does that mean they are accessories for every illegal online purchase?"
That does not make them an accessory if they unknowingly lend you money to do something illegal.
So the credit card companies admit that they can control what people buy or don't buy with their
And for avoidance of doubt "their" refers to the credit card companies. Until you clear the account it's their money loaned to you. When it's stated like that does it seem a little more reasonable to you? If not maybe you'd let me buy some Bitcoin with some of your money. At your risk, of course.
And so the day tripper investors pull out and perhaps invest in shares say via the Lloyds bank share trading platform or whatever. At the end of the day any money that is not in a regular bank is not helpful to the banks so the banks are retaliating.
This was an inevitable part of the bitcoin experiment and it is fair bet that Bitcoin will survive it but the hit to its value is obviously anyone's guess right now. Probably more importantly is what the banks will do next with regards to fight any possible recovery or growth - are they any more capable of fighting it than media creation companies are of fighting the pirate bay?
There's such a tiny portion of money in bitcoin compared to the banking system it is a rounding error on a rounding error on a rounding error. Attributing it to conspiracy theory is ridiculous. Bitcoin is used in criminal transactions and money laundering. Not all certainly but to a large enough degree that this makes sense.
If enough criminals were laundering money by using credit cards to buy iPhones, banks would consider banning the purchase of iPhones with credit. They probably are getting pressure from government over some cases involving this and they've been forced to act, and are using the fall in price of bitcoin as an excuse. That's an obvious red herring, as most things you buy with a credit card either lose value over time or have no value at all by the time you pay for them.
If no one was forcing them they'd be happy to keep taking the transaction fee on each purchase. They already have a process for raising transaction fees for certain types of purchases where fraud is more likely so they could crank it up as high as they needed to account for that.
" Bitcoin is used in criminal transactions and money laundering. Not all certainly but to a large enough degree that this makes sense."
Bollocks. By your own reasoning, then even if all bitcoin transactions where criminal, then it's a minute part of the banking system. Thus the majority of criminal financial activity must be within the current financial system.
The same investment vehicles and corporate structures that are used by the "legitimate" banking system are used by criminals, money launderers and tax dodgers. Are there going to be a crackdown on those? Don't be daft, there's proper money and power in there.
> Bitcoin is used in criminal transactions and money laundering
Bitcoin is *allegedly* used in criminal transactions and money laundering. The allegations - largely if not exclusively - coming from institutions who fear they may be missing out on tax revenue.
>Totally fair point and yet the affect of the banks taking this action now is that the value of bitcoin dropping right now
It's not a factor at all - as you can't use credit cards (from the EU) on crypto exchanges.
It would be nice if a journalist could ask them 'how much has been spent' or 'can you give an example of somewhere it has actually been possible to use one of your credit cards to buy bitcoin' instead of giving them all this nice PR.
No. The banks were bailed out by the taxpayer because they had taken secured risks, but due to the nature of banking their asset book contained lots of long-term debt they were unable to call in. But their debts were all in the form of short-term loans to their customers or slightly longer maturity bonds on the markets.
This is called liquidity transfortmation, and is one of the main social purposes of banking. It's what turns all our small savings accounts into money that can be invested for the long term in businesses and us buying mortgages.
Becuase of this we require Central Banks to loan the banks vast amounts of cash at no notice, to stop bank runs. All that cash was paid back within about a year (most much quicker) as that infinite backing is what stops the system collapsing an causing another 1930s great depression.
2 UK banks were so fucked that they required actual taxpayer bail-outs. For which the government took a matching stake in shares, and has sold off one of those holdings at a profit. Just RBS still to go.
I bet they wouldn't.
If you own your house, then knock yourself out. But I've got a mortgage, and I'm sure that the bank won't allow me to transfer the ownership on the land registry (which protects them from me defaulting) until they've got their grubby little hands on their money. Or at least a solicitor they approve of is holding it in escrow for them, in a sterling account.
At one point, you could get savings accounts paying out more than the cost of mortgage accounts.
However I doubt the bank would be happy with you walking in, asking for a 100% mortgage, and on the little box asking "what is the money for", you putting in "to put back into the savings account with the same bank!". They would be paying you to take out a loan with them. LOL!
You know, when your queue of customers, account holders, is more than 30 people long (often out of the door, banks not Lidl) then fgs open a second teller window.(till).
I've lost count of the number of times any of the several staff floating around doing nothing except asking "is there anything i can do to help" have declined to act on my reasonable suggestion of opening a second window.
One crafty manager did once say they'd be opening another window in a minute or so. Yay. What the bastard omitted to say was that the two existing tellers would simultaneously be closing as they were leaving, at 2:15, to collect sprogs from school.
Ever notice how you rarely get male tellers? Perhaps they can't cope with the "equality" of constantly having to leave work early.
Talk about shutting the stable door once the horse has bolted. I wonder if they're seeing larger cash advances on credit cards used by people buying vapour currency.
Hargreaves Lansdown and Natwest don't let you fund a SIPP or your share dealing account with a credit card. It makes sense really.
The banks aren't going to openly fund a bubble if they haven't got their hands in the till. These pretend currencies are starting to look for and more like some huge scam with every passing day. This is tuning out to be quite amusing.a
This has absolutely nothing do to do with the value or risk of cyrptocoins.
The issue is the total lack of real security on credit card purchases. Usually, the card company simply reverses the payment on fraudulent transactions and Fs over the shop. As any form of purchasing security is clearly forbidden and doubly so in the USA, where a scribble (that nobody checkes) is all that's needed to buy in shops and just the number on the card work for online.
However with Bitcoins and other crypto coins are not reversible, being there is no central authority to authorise reversal of translations.
Thus you buy a boatload of stolen card details (Available on the dark web by the thousand), use a doggy exchange to buy your crypto coins, Go via XMR to anonymise your purchases, back to bitcoin and cash out at some other more reputable exchange.
A simple, quick, efficient and relatively safe way of using the utter lack of security with credit card payment systems.
Banks could have implemented 2FA using your phone for online purchases, but NO its easier to ban all crypto purchased with credit cards.
Less than 2 years ago on a whim I bought £1000 of BTC. Last Xmas I cashed half of those BTC for £4000 and had a pretty good holiday with it, with a lot left over. The other half of my BTC that remains is now worth less than £2000, but even if it was worth nothing, I reckon a 400% return in just over a year is pretty good, and it certainly did not prove to be a stupid investment (which many people told me at the time). Meanwhile the savings in my current account have earned zero and in fact lost value due to inflation.
ISTM that the bubble is not so much in danger of bursting, but is more at risk of being deliberately popped.
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