Coinbase warns customers of extra credit card fees for crypto purchases
These fees are not charged or collected by Coinbase. They show up as a separate line item on statements.
Digital exchange Coinbase has warned customers that, due to recent changes to the Merchant Category Code (MCC), credit card companies are now able to charge additional “cash advance” fees on crypto purchases.
An email was sent to Coinbase users with a credit card on file, encouraging them to switch to a debit card or bank account as their primary payment method to avoid incurring any extra charges.
“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,” Coinbase said in the email. “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 said that it does not know whether or not a particular customer’s card issuer collects these fees, nor the amount charged. Nonetheless, the company apologized to its users for the inconvenience.
An MCC is a classification code assigned to a business by card issuers when payments are first accepted but can be changed, as in the case of Coinbase. The code is determined by the type of goods or services provided.
The Internal Revenue Service (IRS) publishes a list of MCCs, but each card network – American Express, Discover, MasterCard and Visa – also has its own. Sometimes a merchant may be inaccurately categorized because its code only represents one part of its business.
MCCs can have an effect on credit card processing rates. Transaction rates and fees are often decided by the industry a business operates in. Higher risk industries, such as crypto trading, are likelier to attract greater fees.
It’s not yet known who requested the merchant code changes. finder.com contacted Coinbase for comment.
European-based digital exchange Bitstamp added independent payment processor Masterpayment as its partner for credit card processing and cryptocurrency purchases in November last year. This allowed Bitstamp customers to spend USD or EUR using Visa and Mastercard credit or debit cards to purchase bitcoin, Litecoin, ether and Ripple. Transaction fees were lowered from 8% to 5% to reflect any potential regulatory changes.
Last week, Robinhood, a US-based trading app popular with millennials, announced it will allow users to trade cryptocurrencies, commission-free, alongside stocks, exchange-traded funds (ETFs) and options strategies.
Mobile payments company Square has integrated the ability to buy and sell bitcoin through its Cash App.
Mastercard chief financial officer Martina Hund-Mejean said the payment network’s cross-border volumes – international spending – are up 22% percent already this year, stoked partly by digital currency purchases.
“Just to be clear, we do not switch or settle cryptocurrency transactions over our network,” Hund-Mejean said on a call with analysts, according to Bloomberg. “Our plans do not presume this type of activity will continue as we have no line of sight as to how cardholders will view cryptocurrencies in the future.”
Coinbase has headquarters in San Francisco, operates in most US states, as well as Canada, the United Kingdom and Europe, and is estimated to provide trading services for around 13.3 million users worldwide.
However, given the recent explosion of enthusiasm in the market, these figures may be significantly higher in early 2018. Increased interest in crpyto has spurred debate as to whether these inexperienced exchanges are able to implement proper vetting controls, quality assurance and account authenticity, while maintaining the ability to meet client requests in a timely fashion, process bulk transactions and retain agile network speeds.
Earlier this year, global finance giant Visa’s chief executive Alfred Kelly said the digital currency market was “still evolving” and that cryptocurrencies, such as bitcoin, are not an acceptable form of payment. Additionally, several prepaid crypto debit card providers had their services suspended by Visa at the beginning of January.
Online payments giant Stripe has also distanced itself from decentralized digital currency bitcoin, which it has supported since mid-2014, citing lengthy transaction times, rising fees and dwindling customer appetite.