Credit Card Crypto purchase fees to increase
Alright listen up! The banks and governments are at it again and this time it's a bit more subtle. But it's definitely aimed at punishing the crypto world and invading your privacy. Allow me to explain...
I was awake for the day no earlier than 4:15 a.m. today as frequently seems to happen when there's a full moon (I don't know why). I tried to go back to sleep as I usually get up around 6 a.m. and after laying there for half an hour wide awake I threw in the towel, went downstairs, and woke up the coffee maker earlier than it's used to getting up.
Then I got online and checked my email to find this nice little gem of a message from Coinbase...
"Dear Coinbase Customer
We’re writing because you have a credit card on file and want to inform you of a recent change that may increase the cost of purchasing digital currency with a credit card.
Recently, the MCC code for digital currency purchases was changed by a number of the major credit card networks. The new code will allow banks and card issuers to charge additional "cash advance" fees. These fees are not charged or collected by Coinbase. These additional fees will show up as a separate line item on your card statement.
Coinbase does not know whether or not your card issuer collects these fees, nor do we know how much they might collect. As a result, we would strongly suggest switching to a debit card or bank account as your primary payment method. You can do that on the following page: https://www.coinbase.com/settings/linked-accounts.
We apologize for any inconvenience this might cause.
Best,
The Coinbase Team"
So why is this important? Shouldn't people be more responsible and use funds they actually have rather than buy on a credit card? Maybe, but that's not my business nor is it anyone else's but the person making the purchase.
I myself used my CC to buy on CB many times so I could access my crypto to send and trade on another exchange without having to wait a damn week for my funds to clear.
I think this time period is shorter or maybe even eliminated now in the case of some exchanges, but that's why I used my CC in the past to buy crypto with fiat, plus I get cash back on that card so the overall purchase fee ended up being about the same (after the cashback reward) as it would if I'd used a bank account. But on to my point...
The card companies know that there are times when people want to buy immediately and they use a credit card to defer paying fiat for a few weeks give or take until monthly payment deadline for the card. So by upping the fees they are
- Collecting more revenue from one group of people than another (targeting crypto buyers=discrimination IMO) based on what they're buying
- Possibly discouraging would-be buyers of cryptos
- Punishing people who don't want to wait however many days for funds to clear on the crypto exchange from money they actually DO have in a bank
But there's something more ominous here
I clicked the "MCC code" link in the email from CB and was directed here to wikipedia and that last sentence at the bottom set off alarm bells in my head (I put a red box around it).
https://en.wikipedia.org/wiki/Merchant_category_code
In the United States, it can be used to determine whether or not a payment needs to be reported to the Internal Revenue Service for tax purposes.
I've never had a credit card company report a purchase I made to the IRS to my knowledge as I've never received a tax form from any credit card company showing data sent to the IRS. That doesn't mean it hasn't happened but something stinks here far worse than just higher fees.
For now this doesn't mean anything expect they (the credit card companies) aree increasing their fees. However, the IRS knows damn good and well they're gonna have a hard time tracking people's trading activity and I suspect this is an early step in banks and the IRS colluding to identify and target people who have bought a lot of cryptos.
They know many people will not report trading activity as the new and draconian crypto laws in the US (crypto is property and not currency, coin for coin trade profits / losses must be reported, etc.) make it a burden for people to do so because even a lot of tax professionals don't even know how to report crypto gains / losses on a tax return much less the average joe.
For tax year 2017, they aren't gonna do shit with this (I don't think). But I suspect in the near future the IRS will use the data as a tool to detect, target, and use it as ammo during an audit for people who leave out crypto trading activity altogether when filing their taxes.
Funny how one little fee increase can indicate so much more isn't it? I see what they're doing here and I think I know why they're doing it. It's because the banks are terrified of cryptos and the vampire branch of the US government (the IRS) wants all the resources they can have to catch people who aren't reporting gains, even though it's still unclear to many how the hell to even report gains if they wanted to (and should) do so!
My Conclusion
This is just another desperate attempt at suppressing and controlling commerce in what is supposedly a "free market economy" but is really crony capitalism and collusion between two parties (the unholy alliance of big business and big government).
They're doing everything they can to scare, discourage, and punish people who are entering the crypto market and in the end I think they're going to regret it. But that end won't come for them (the banksters) for a very long time.
For Tax year 2018, you might consider using some other method of acquiring crypto with fiat other than with a credit card. I don't know if they'll apply it to debit cards or regular old bank accounts in the future as well but I suspect that's coming soon.
This has just given me one more reason to loathe and not trust the big banks and the government. These hogs are getting way too fat, reckless, and downright tyrannical and it's far past time for a good old fashion slaughter.
Please note that much of this is speculation on my part and don't take it too too seriously, but please do make a mental note of it and consider your payment method next time you're buying crypto with fiat. I'm not advising anyone to change their buying habits or tax reporting strategy, I'm merely giving a word of warning that there is more to this fee increase than meets the eye. I plan to pay my taxes on my 2017 gains to the best of my ability and I'll leave it at that.
The fees are already pretty bad and this is both a fee and another step towards tracking us. Thanks for this post, got my vote and a follow.
Yep the fees are already high enough on one side and the credit card companies make plenty of money as it is. I have no doubt this is a subtle "f you" from the banks to the crypto community. Well they can do what they want but I don't think they understand what they're up against. It's like a grown man picking a fight with a 7 year old in the case of Bitcoin or a toddler for many other cryptos as cryptos are just in their infancy. I'd say in 5 - 10 years the big banks and CC companies will be screaming for mercy. At least I hope so.
I generally agree with everything you're saying, but it's important to keep in mind that there are two sides to all of this. Credit card companies offer a very, very helpful feature to their users which is the ability to dispute purchases and remove charges for literally almost any reason.
I have done this a few times in the past when some product or service that I paid for with my credit card was unsatisfactory and the company would not make it right. It is an absolutely essential service in my opinion.
The problem is that people know about this and sometimes use it as a scam. They make a big purchase using their credit card and dispute it and get their money back. This type of thing costs credit card companies a LOT of money, yet overall it's worth it for them because it's such a great feature for consumers. I would never use a credit card that does not offer this protection.
I suspect that with cryptocurrency purchases, the number of disputes is much higher than many other more mainstream purchase categories, as is also the case with things like online gambling for example. In these cases credit card companies always group these type of "high risk" purchases under a new MCC code with higher fees to offset these costs.
So I don't think cryptocurrencies are necessarily being targeted here (and i don't know anything about the IRS stuff), I just think this is the natural progression of having a new type of transaction which is higher risk than normal being handled by credit card companies.
That's an interesting take on it. You do pose a valid point about them protecting themselves from fraud and abuse as it does happen.
It's really the IRS side of it that bothers me the most. They've made the laws regarding cryptos so complicated for people who do plan to actually pay taxes on their gains and as of now very few people even know how to report properly. Maybe I'm just being paranoid but the IRS tracking thing really bothered me. Seems like their setting the stage for something...
I don´t know if the markets on Red are already a reflex of this news, but definitely they are trying to make it harder and harder to get into the crypto world, while some new platforms are introducing cryptocurrencies to millions of new potential investors.
What I think about fees will never change, but they are abusing us...
People with big profits need to start consider leaving this countries and go for a paradise.
I'm definitely setting the long term goal of leaving the US if I do manage to get wealthy enough in whatever way...Steemit may be my ticket out or any or a mix of the other 15 or so different cryptos I own and continue to buy.
I just need to figure out where. I've heard Argentina is nice...
Yep, first we need to get milionares :D
I hear that Panama is not bad too, but I´m not realy into that for now!
I just hope that people take the time to read the message like you did, otherwise they could face some hefty fees in the future.
It's a shame that the banks have so much power to tell us how we can spend money, but we'll find ways around it. Like you said, a lot of the waiting times seem to have been massively reduced, so debit cards should be used from now on.
I've got my CB set up so I can purchase directly from my bank account and will be doing so from now on. I'll just get the 2% rewards from the mastercard I was using for some CB buys for everything except crypto purchases. I've already earned a few hundred bucks in rewards off that card this year. Stickin it to them!
I guess now buying crypto with a CC is kind of like using an atm that's not operated by your bank, you can get hit by fees from both sides now. Not good.
All cryptocurrencies are really money networks. If they're designed right, they will route around "damage".
Excellent article, @cryptokeepr! I agree with you that the last line gets the camel's nose into the tent as anytime the IRS gets a new tool to log and investigate you can bet the whole body of government will appear shortly thereafter. Our entire system of government is funded by a "voluntary at the point of a gun and verified by whatever unconstitutional method of data mining we can get away with" system, so it should not surprise us that the banksters want more money and get their friends in government to cast a blind eye on illegal activities so they backdoor IRS access to priviledged financial data. If the IRS wants to know what you spend money on they usually have to get a warrant, so this amounts to 4th Amendment illegal search and seizure.
On a different note, do you know if cryptocurrency purchases are governed by the SAR $5,000/10,000 standards if bought with fiat money (or other crypto for that matter, on second thought) from a regular bank account electronically? That would really bother me if every time I bought a Bitcoin the Treasury was getting an alert of potential money laundering...
Great thoughts, upvoted, and following:-)
I'm not sure about that SAR standard. The only thing I know for sure that the government has gotten from coinbase is data about users who've made large withdrawals (over 20K I think).
And you pose an interesting point about illegal search and seizure. It seems they think that law doesn't apply to data as the NSA pokes around everywhere all over the globe, even into the affairs of other world leaders. This crap is getting way out of hand.
About fat hogs 100% right
Thank you for reading the small print for the rest of us.
They really pack a lot of potential information into those tiny letters, don't they?
I'm curious. Are financial institutions like credit cards required to notify their customers every time information has been supplied to the IRS? I know investment banks and such are, but are there all-encompassing rules?
I'm really not sure. It's been my experience that usually when a form gets sent to the IRS it also must be sent to the individual.
I've never received a tax form from a credit card company and hopefully the IRS hasn't received anything from them about me either lol. I don't know that this necessarily means that the CC co's will provide data to the IRS for some dollar amount limit transaction but they've definitely got the door wide open to hand over our transaction data. This seems like a little bit more than a coincidence.
It definitely does! And as Snowden revealed, we share a hell of a lot more with those three-letter agencies than we realize.
This gets more interesting when we consider the antipathy that the Republicans in Congress have for the IRS. Never mind that the GOP passed the bill that proposed what is affectionately known as "The 16th Amendment" as a ruse to bait the Democrats and paint them as the "soak the rich" party. They admit in hindsight that their joke went too far.
For decades, the GOP has been doing everything they can to cut funding to the IRS and limit their abilities. I'm sure that some secret letter or other administrative decision by the IRS, issued in the dead of night, will make it easy for the wealthy entrenched interests to profit from crypto without reporting their gains. It's really an information game.
In the long run, it's really up to the next generation of voters to decide what public policy is. And that next generation, the Millennials, often the target of insults and criticism by previous generations, are 83 million strong. Many of the cryptocurrencies that are in circulation now are the electronic progeny of Millennials. They will be setting public policy in the not too distant future. They're doing it already in Asia. We can't be that far behind.
I think we desperately need to get away from the two party system and I hope to see that happen. A lot of US citizens are actually more libertarian than democrat or republican, they just don't realize it. But yes it is funny (not in a haha kind of way) that the republicans hold the power right now yet the tax code still gets more complicated for the little guy and benefits the wealthy. Sure maybe we'll pay a tiny bit less in taxes but every year they make it more complicated to file.
I hope you're right that the millenial generation makes things right with their votes eventually. And yes you're right millenials do get a bad rap. I fall right between the millenial generation and Gen X as I was born at the end of 1979. I think there's some new term for that year and the couple of years before and after but I can't recall...
I think if you're between them, you're a "tweener". :) Since you're much closer to the millennials than I am, you seem to have a better feel for them. I'm a Boomer, but I'm right on the edge, so not so sure of my demographic.
I am with you on a move away from a two party system. I'm hopelessly non-partisan, so I just go with the policies, not the identities. I am hopeful the millennials will see the folly of the two-party system and replace it with something much better.
Exactly what I was looking for!
Upvoted, resteemed and following!
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