Stats on Why Buying Bitcoin with Credit Cards is a Bad Idea

The reasoning behind banning credit cards for bitcoin purchases

Purchasing bitcoin, or any altcoin, with a credit card may seem easy and rewarding - especially if you use a card that awards cash back or airline miles.

Yet it seems investors are setting themselves up for failure as they're not able to pay off balances in full. You can't buy stocks or gamble with credit for good reason, so why would this be allowed?

Because of the volatile nature of cryptocurrency, big banks are restricting the purchase of any cryptocurrency with plastic as they deem it too risky. As of Feb 2018, these banks prohibit the purchase of cryptocurrencies using their cards:

Citi
JPMorgan Chase
Capital One
Bank of America

Here's a statement from Barclays in London:

We are making the decision that we will likely no[t] allow cryptocurrency purchases on the card,

- Paul Wilmore, managing director at Barclaycard

Currently, they're examining their policy for each nation they offer credit before banning the purchase of crypto-coins via their card.

What are the stats?

Purchasing bitcoin and not able to pay off entire balance

A LendEDU survey found that 18.15% of investors purchased bitcoin with a credit card. Of that bunch, 22% couldn't pay off their balance entirely. So with the extreme volatility of the coin, the possibility of incurring large amounts of debt is a very real concern.

Delinquencies rising and banks seeing losses despite booming economy

Based on Federal Reserve data, credit card delinquencies have increased by 2.53% across commercial banks - with four major U.S. banks (C, WFC, BAC and JPM) seeing credit card losses rise 20% in 2017 compared to 2016.

Also, $3.2 billion was written off by these banks in Q4 of 2017 - a 16% rise from the same period last year. One can suspect the descent of bitcoin in December could've influenced the rise in noncollectable debt. Card issuers simply don't want to take on the risk in the crypto market.

So where can you still use credit cards?

Sites that allow bitcoin credit card purchases include Cex.io, Coinmama.com, Exmo (currently prohibits U.S. traders) and Coinbase (only credit cards linked to accounts prior to Feb 13, 2018 can be used).

You can find a more complete list of exchanges and their payment methods with this link.

Key takeaway

When it comes to such a risky investment, conservative methods of payment are the best. However, if you're responsible financially and are able to purchase bitcoin with credit and pay the balance off in full, then there are huge benefits (flier miles, rewards points, cash back, etc). But be aware that government regulation, exchange hacks and other factors can send the coin spiraling down.