Lloyds Bank first in UK to stop credit card Bitcoin purchases

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Originally Posted by aidanjt

It just comes with the caveat that you have to pay it back.

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Ie it is an unsecured loan - the credit card is the means of obtaining the loan (or line of credit) and does not rely on your actual assets at the time, although the credit limit would be set on your income and credit history. And like most loans the lender may place restrictions on what you use the money for.

Using a debit card does use your money as it draws on yur current account (including any agreed overdraft limit).

The banks have not placed restrictions for buying bitcoins with your money, using a debit card, only with theirs using a credit card.

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Originally Posted by aidanjt

It's your money when you spend it, right up until it's transferred to the merchant, anyway. It just comes with the caveat that you have to pay it back. Whether the 'merchant' is an ATM machine, shop, etailer, or Bitcoin exchange is irrelevant. If the bank suspects you can't afford to repay a line of credit, they shouldn't offer it in the first place.

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But, but .... this is them declining to extend it, for bitcoins.

I see it as Peterb does .... this is the bank declining to allow customers to speculate on something as speculative and volatile as bitcoin, using their (Lloyds) money. What they don't want is people over-extending to jump on the bitcoin bandwagon, get stung and endjng up defaulting on their card debt, or simply declaring bankrupcy.

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Originally Posted by Saracen

But, but .... this is them declining to extend it, for bitcoins.

I see it as Peterb does .... this is the bank declining to allow customers to speculate on something as speculative and volatile as bitcoin, using their (Lloyds) money. What they don't want is people over-extending to jump on the bitcoin bandwagon, get stung and endjng up defaulting on their card debt, or simply declaring bankrupcy.

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I think it's a little more subtle than that - you can gamble on a credit card I think (I don't know), but that's treated as spending. What someone might do with a bitcoin however is claim they are using credit to buy an asset, which might be declared as such on a balance sheet. However if the value of said asset is super volitile, like bitcoins, then banks have no real way of assessing if it's responsible lending to give someone money to buy an asset.

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Originally Posted by kalniel

I think it's a little more subtle than that - you can gamble on a credit card I think (I don't know), but that's treated as spending. What someone might do with a bitcoin however is claim they are using credit to buy an asset, which might be declared as such on a balance sheet. However if the value of said asset is super volitile, like bitcoins, then banks have no real way of assessing if it's responsible lending to give someone money to buy an asset.

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You're right, of course, it is more subtle than the simplistic way I put it.

However .... it boils down to the same principle, surely ..... he who extends credit or gives a loan has a right, and argubly a duty, to risk-assess the transaction.

Also, I guess it provokes a discussion as to where the line between investment and gambling is, since every investment, by definition, involves risk. The credut card companies and banks seem to regard, increasingly, bitcoin "investment" at at the extreme risk end of investment where the risk is that anyone going in big could end up bankrupt.

That accords with my view of investment, which is to not risk what you cannot afford to lose, and the greater the risk of significant, or complete, loss the more comfortably you need to be able to afford to lose it before it becomes accrptable risk.

If the banking world had taken a more responsible view of what wholly inappropriate investments to make, we wouldn't have had a sub-prime crash, and we wouldn't have had anything like as much damage from sliced-and-diced "securitised" fancy invextment vehicles if they hadn't been stuffed with unknown amounts of unvalueable zero-value sub-prime junk.

The last 10 years would have been very different.

This is at least a small sign of a banking system being a tad more responsible.

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Originally Posted by kalniel

I think it's a little more subtle than that - you can gamble on a credit card I think (I don't know), but that's treated as spending. What someone might do with a bitcoin however is claim they are using credit to buy an asset, which might be declared as such on a balance sheet. However if the value of said asset is super volitile, like bitcoins, then banks have no real way of assessing if it's responsible lending to give someone money to buy an asset.

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I don’t think you can buy gambling chips in a casino with a credit card - at least not in this country. I don’t know about on-line, I suppose it depends on the regulatory regime where the site is and their honesty in declaring what the site is for to their card services provider. Of course there is nothing to stop someone getting a cash advance and buying whatever they like, but that is an extra step and mat prevent the impulse purchase or chasing losses.

But I too regard this move by Lloyds (and I would expect other banks to follow) as indicative of a more responsible attitude to lending to protect their assets and their customers’.

You can't buy gambling money in either the US or UK with credit cards.

Just because the retail arms of banks have stringent rules for their consumers does not in any way suggest that their finance arms are subject to anything like the same level of stringency, so it does not give me any hope whatsoever that the banks are starting to behave the way they should.

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Originally Posted by wazzickle

You can't buy gambling money in either the US or UK with credit cards.

Just because the retail arms of banks have stringent rules for their consumers does not in any way suggest that their finance arms are subject to anything like the same level of stringency, so it does not give me any hope whatsoever that the banks are starting to behave the way they should.

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Maybe not, but the retail and merchant banking sections are being separated, so if the merchant banking arm 'gamble' with its (or its shareholders) money that is their look out.

However too much caution is also a bad thing for business customers who are seeking to expand their businesses (and therefore contribute to economic growth etc)

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Originally Posted by wazzickle

You can't buy gambling money in either the US or UK with credit cards.

Just because the retail arms of banks have stringent rules for their consumers does not in any way suggest that their finance arms are subject to anything like the same level of stringency, so it does not give me any hope whatsoever that the banks are starting to behave the way they should.

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Oh, I'm not suggesting the banking industry has it's act sorted out. I'm sure the best to do with about half the professional gamblers in non-retail banking would be for them to be first up against the wall, come the revolution.

But we can't moan at them for their antics leafing to the crash, then moan at them when they do something that is financially more responsible in case it infringes our freedom to end up bankrupt because of our own greed and stupidity.

Sure you can. They're not trying to protect us from gambling, they're using gambling as an excuse to protect their own interests. The whole point about banking is to use your position of advantage to set up a win-win scenario, and anything that represents a potential loss either way is toxic to their business model. Customers investing (or betting, whatever) on an alternative business model obviously, i.e. crypto, presents them with a loss of their monopoly of the banking system over our lives, so they'll look to protect that.

I think that over the last few weeks that the volatile nature has meant that using credit to effectively buy a potential huge loss is why they're banning it. They're not stopping you using your debit card or bank balance to buy it just your credit card. As said that's their money and up to them to recover it - but thevery nature of crypto currency means they could incur significant losses at a time when they are struggling anyhoo. They're not the only bank to take this stance - crypto currency has effectively been stopped in certain countries because of fears over losses

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Originally Posted by wazzickle

Sure you can. They're not trying to protect us from gambling, they're using gambling as an excuse to protect their own interests. The whole point about banking is to use your position of advantage to set up a win-win scenario, and anything that represents a potential loss either way is toxic to their business model. Customers investing (or betting, whatever) on an alternative business model obviously, i.e. crypto, presents them with a loss of their monopoly of the banking system over our lives, so they'll look to protect that.

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Not sure what your point is.

Is it that they are protecting themselves from customers who might bankrupt themselves over following a highly speculative investment - which is entirely reasonable (especially as Lloyds was one of the banks bailed out by the tax payer - so it is entirely reasonable that they should be more cautious to avoid the charge of \'irresponsible lending\'.

Or is it that they are clamping down on crypto currencies because it threatens the banking model? That doesn\'t stand up to scrutiny - they have not stopped the use of debit cards and they cannot stop someone from taking a ash advance and using the money for whatever purpose you want - but that introduces a step in the process which might stop someone from impulse buying, or chasing a loss.

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Originally Posted by wazzickle

Sure you can. They're not trying to protect us from gambling, they're using gambling as an excuse to protect their own interests. The whole point about banking is to use your position of advantage to set up a win-win scenario, and anything that represents a potential loss either way is toxic to their business model. Customers investing (or betting, whatever) on an alternative business model obviously, i.e. crypto, presents them with a loss of their monopoly of the banking system over our lives, so they'll look to protect that.

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Okay, we can criticise them for doing what we criticised them for not doing. But it's classic double standards to do so.

And of course they're not ttying to protect us from gambling, any more than supermarkets try to protect us from alcohol, cigarettes or even over-eaying. It's not their function and frankly, I'd resent it if they tried. As I and others said earlier, they're protecting themselves from excessive risk-taking with their money, just like they should have before issuing millionscof sub-prime mortgages to people whose circumstances even a cursory due diligence would have revealed to stand no chance of paying back, thereby risking the entire system everybidy relies on.

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Originally Posted by Saracen

he who extends credit or gives a loan has a right, and argubly a duty, to risk-assess the transaction.

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I strongly disagree, their rights and duties to assess risk ends the moment they offer the line of credit. They periodically reevaluate the risk depending on your income, credit score and repayment history. But they shouldn't be imposing per-transaction acceptability decisions. The card holder assumes the risk of buying bitcoin, and if it explodes in their face, they still have to pay it back. And if they can't pay it back, they shouldn't have had so much credit available in the first place. Either the risk assessment during application acceptance is sound, or it isn't, and we have much bigger problems. Because anyone can max out a credit card on a whole host of other things. There's nothing inherently more risky about maxing your credit card on bitcoin than any other thing.

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Originally Posted by aidanjt

I strongly disagree, their rights and duties to assess risk ends the moment they offer the line of credit. They periodically reevaluate the risk depending on your income, credit score and repayment history. But they shouldn't be imposing per-transaction acceptability decisions. The card holder assumes the risk of buying bitcoin, and if it explodes in their face, they still have to pay it back. And if they can't pay it back, they shouldn't have had so much credit available in the first place. Either the risk assessment during application acceptance is sound, or it isn't, and we have much bigger problems. Because anyone can max out a credit card on a whole host of other things. There's nothing inherently more risky about maxing your credit card on bitcoin than any other thing.

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You are, of course, entitled to disagree but the fact renains that banks always have, and will, assessed on-going risk, on a per-transction basis. It is, in fact and in lawm not simething that ends when they offer the line of credit.

However, traditionally, they don't block much on policy grounds. Mostly, anything illegal, and paying of debts, like mortgage payments. Many credit card companies, though generally not UK ones, also block gambling transactions (by blocking the merchant codes issued to gambling operations). And they all can, do and should conduct continuous risk assessments. Ever had an "unusual" transaction blocked? I have, when their systens flagged what happened to be unusual, and therefore suspicious.

Had they let that transaction through, and it had turned out to be fraudlent, then depending on circumstances, there's a good chance the bank would be on the hook for the loss. So, per-transction risk assessment results in 'computer-say-no'.

And this is the same thing, except that they have now decided that the risk of large bitcoin purchases for "investment" coming badly unstuck, leaving the cardholder with large debts they cannot pay vack and, ultimately leaving the bank holding the loss, that they've decided, as a company, it is a risk they are not prepared to take. After all, it's very possible they are the ones ultimately losing the money.

Of course, if the cardholder has the money and wants to risk their own money, use a debit card. But banks are entitled to decide if they want to let consumers risk the banks money on highly speculative purchases like bitcoin. Personally, I'd glad they do. More ought to follow suit. And probably will.

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Originally Posted by Saracen

Had they let that transaction through, and it had turned out to be fraudlent

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There's a massive massive difference between fraud and spending irresponsibly. And again, there's nothing inherently more risky with buying bitcoin, and buying any other thing.

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Originally Posted by aidanjt

And again, there's nothing inherently more risky with buying bitcoin, and buying any other thing.

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Buying any other thing, normally, doesn't come with the risk of the lender not being able to recoup some or all of their money if you default, if you can't or won't pay then the debt collectors, or whatever they're called these days, can pay you a visit and take away your belongings that you probably bought with the money they loaned to you so they can recoup some of the money you owe then. That can't be done with bitcoin.