Following on from Visa CEO’s statement on cryptocurrencies in January , it turns out that Visa and Mastercard have reclassified the way Bitcoin and other cryptocurrency purchases are processed on their networks.
The changes were noted as Bitcoin investors started noticing additional fees on their bank statements. Currently, if you want to buy bitcoin, ethereum or any other alt-coin instantly, the only option is to use your debit or credit card. Transferring funds from your bank has lower fees, but takes several days. Coinbase has long accepted debit and credit cards for instant buys, however, passing on to the buyer the standard 4% credit card transaction fee.
Coinbase transactions (and presumably all other exchanges, as well) are now being labelled as a “cash advance” rather than a “purchase.” Fees will vary by institution, but what this means is that using a credit card will result in an additional 5% fee tacked on by your credit card merchant, in addition to the 4% credit card transaction fee already passed on by Coinbase.
Even worse is that cash advances do not fall under the standard interest-free grace period that consumers expect for other credit card purchases. The moment the Coinbase purchase goes through, the transaction accrues and compounds daily. The interest rate is also higher for cash advances — up to 25.99% in one case.
In an email to all customers Coinbase confirmed the change, claiming “the MCC code for digital currency purchases was changed by a number of the major credit card networks” and will now allow banks and card issuers to charge “additional cash advance fees.”
When asked for comment a spokesperson for Mastercard said: “Over the past few weeks, we have clarified to acquirers — or the merchant’s bank — the right transaction or merchant category code to use for these type of transactions (cryptocurrency purchases). This provides a consistent view of such purchases for both merchants and issuers.”
“Visa allows credit, debit and certain prepaid Visa products to be used to purchase cryptocurrency, provided such transactions are legal in both the buyer’s and seller’s jurisdictions. Acquirers and merchants are responsible for ensuring that all Visa transactions are properly coded in the Visa payment system, so that issuers can rely on accurate and consistent coding when making authorization decisions. These codes have been in place for some time. Issuers make authorization decisions and determine cardholder fees, if any,” Visa said in a statement.