June 25, 2018

MCC Changes Will Cost Investors Additional Exchange Fees

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Investors continue to be pummeled by bad news as the crypto-market is becoming a hub for disappointment. Coinbase, one of North America’s most trustworthy exchanges, informed some of its customers that certain credit card firms will be charging new fees for any purchases of digital currency. The exchange quickly made it known that all fees and would be charged and collected by these firms, not by Coinbase.

Rumors swirled in January that Mastercard and Visa would be among the hardest hit by a change in merchant category code (MCC). These codes underwent recent revision as major credit firms outlined a new definition for exchange transactions. Coinbase reached out to customers via email, stating “The new code will allow banks and card issuers to charge additional ‘cash advance’ fees.” Many have been calling for cryptocurrency to be seen as a legitimate tender, and this is one of the drawbacks. Unfortunately for investors, the tokens still lack the actual utility to be actively used in such a way.

The role of credit firms in the crypto-world comes rather ironically. Retail usage of digital tokens would act as a surefire alternative to the present credit system. Lower rates and faster transactions could eliminate the need for third-party entities such as Visa, Mastercard, Discover, or American Express. Until then, it appears customers will be furthered hindered by the controlling position of their favorite lenders.

Investors can blame the continued market downturn for the birth of new tolls. December 2017’s unparalleled ascent in value left incredulous traders making rash decisions. Some invested lifesavings, others took loans on their houses, and more placed a heavy reliance on their credit line. Cards’ interest rates should have been enough of a deterrent, but short-term returns blinded rookie investors.

Impending lapses on the extravagant purchases are forcing companies to find a secondary source of income to counter the losses. Investors who placed too much emphasis on the unsustainable returns will not be able to pay back their short-term loans are tied into tokens hemorrhaging value.

Customers will be informed of which cards are being “taxed” at a higher rate, but the changes in MCC codes will not be a unique occurrence. Expect all large entities to follow suit in a more dedicated counter-effort to the volatile crypto-market. A safety valve for firms at risk, the fees will become simply another part of the process.

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