What is happening?
If you have not heard by now bank bullies like Bank Of America, Citigroup, JP Morgan, Capital One and Discover, just to name a few, have all chosen to ban the use of their credit card to purchase cryptocurrencies. And, the list grows every day it seems
Why are banks doing this?
The main reason banks are taking actions is that they claim that is too “risky” to allow the people to buy crypto because they think it will cause an increase in credit defaults.
I am sorry! Are Banks afraid of people defaulting payments? I have to call BS on this. First, banks issue credit based on the individual’s credit history, and even with that, banks still have people that default on payments anyways. Second, so banks are telling you and me that we can buy any other investment opportunity that is out there except for crypto. Third, they will go so far as to deny the people liquidity to invest in themselves. Banks are the ones taking the risk issuing credit to individuals in the first place. Banks have been doing this for decades, and they seem to be doing just fine. Not to mention the tax benefits that they get if a person defaults on their credit card loan. Fourth, let’s look at the historical credit card default rates from 1991 to now according to the graph below from Fred.Stlouisfed.org
That’s funny. It seems they have the credit card default rate under control. They managed to get the rate down to 2.5% from a high of 6.77%. So that means that more than 97.5% of people they issue credit cards are paying on time as they should.
The fact of the matter is that Bitcoin along with other cryptocurrencies is a monumental competitor to banks. Banks know that crypto is a real threat and they will do anything to stop cryptocurrencies and Bitcoin.
I believe banks are overextending their authority. I don’t think dictating what people can or can not invest should be up to the banks to decide. If an individual applied for credit and based on his or her credit history, they are given a certain amount to spend. They should be able to use that money however they choose. After all, aren’t credit penalties in place for people that do not pay their bills?
Shouldn’t you and I have the choice of how we spend our money?