Today, with the rise in the popularity of cryptocurrencies, people of all backgrounds use crypto exchanges to buy different coins. However, Users of various crypto exchanges have reported that my card doesn't work trying to buy crypto; this happens because credit card companies consider crypto exchanges as high-risk businesses. These companies protect themselves from chargebacks, where customers can claim that their charges were false and request refunds. Whether their claim is justified or not, the credit card company must pay back the charges. This results in most credit card companies avoiding high-risk businesses with a high chargeback percentage, like crypto exchanges and gambling websites. A solution to this issue is to make a bank transfer to PlasBit and buy crypto through our service.
With the growth of cryptocurrencies’ global popularity and their acceptance in the global economy, the scale and frequency of crypto transactions have risen as well, which results in higher rates of financial fraud. In response, credit card companies have used measures that minimize the potential for criminal use of their services. These measures are placed to protect both the financial institutions and the customers from significant financial damage that fraud can cause.
Credit card providers may even freeze suspicious accounts or cancel transactions that are considered to be high-risk, particularly those associated with cryptocurrency trading platforms that lack security. Other Examples of preventative measures used by credit card companies include a strict verification of the user’s identity, monitoring for any transaction pattern resembling fraud, and cooperation with the police and other law enforcement agencies.
The biggest advantage of crypto transactions is their enhanced anonymity, but this also attracts criminals. This has resulted in a challenging and complex problem for credit card companies, which has led to stricter regulations and measures than conventional methods of transaction. In this PlasBit article, we will explain that although frustrating, these regulations are necessary for your financial safety, and by learning some tips and tricks, you can exchange your crypto capital safely.
Credit Card Risk and Crypto Transactions: A Scenario
The use of credit cards in purchasing cryptocurrencies poses many risks to credit card companies. The fact that crypto purchases are anonymous makes them particularly vulnerable to fraud, which creates several issues for banks and credit card companies. Here's a detailed look at a typical fraud scenario involving cryptocurrency:
Fraudulent Crypto Purchases
Criminals who have access to others' credit card details often use this information to purchase cryptocurrencies because cryptocurrency transactions are less traceable than conventional ones. This highlights how criminals can exploit the speed and anonymity that crypto transactions provide.
Discovery and Dispute
When cardholders see charges that they do not recognize, they report these suspicious charges to the bank or the credit card company. This is the most common reaction, as when checking credit card bills, unfamiliar purchases are seen.
Chargeback Process
Consumer protective laws force the bank or the credit card company to protect their user from fraud and scams, so according to these laws, the customer has the right to dispute fraudulent transactions. After this, the bank or credit card company must initiate a chargeback and pay the customer for their lost capital. This process ensures that consumers are protected against unauthorized charges made with their cards.
Unrepairable Losses
When someone requests a chargeback for a cryptocurrency purchase, the credit card provider should refund the customer. However, once cryptocurrencies are sent, they can't be taken back by the card provider. This leads to a financial loss for the provider because they cannot recover the transferred crypto assets. This is why many banks and card companies avoid dealing with high-risk businesses like crypto exchanges to prevent such losses.
Additional Risk Scenario for Credit Card Companies in Crypto Transactions
Even users’ mood swings and market instabilities can cause financial damage to credit card providers. For example, these scenarios in the following sections highlight how regretful purchases and market downturns can cause problems for credit card companies.
Impulsive Purchases
Customers might make impulsive decisions and purchase cryptocurrencies without any research or planning. Users make these kinds of purchases because of the fear that they might miss out on a potential gain.
Market Loss and Buyer's Regret
The crypto market is known to be unstable, so the value of crypto assets might fall an hour after their purchase, or the users themselves might engage in unsafe trading, which can cause a total loss of assets.
Dispute as Fraud
In a state of panic and regret, some users might falsely file a complaint, claiming that the transactions were unauthorized or misleading, requesting a chargeback in the hope of regaining their lost assets.
Obligatory Refunds
The credit card company is required to investigate the client’s complaint, and if it proves to be truthful, then the credit card provider is responsible for fully refunding the disputed capital. This process, named chargeback, is a part of consumer protection laws that shield consumers from the loss of their assets to fraud and scams.
Financial Implications
This scenario highlights how the client’s impulsive behavior and market instability can result in significant financial loss for the credit card provider. It is noteworthy that not only do these companies lose the money refunded to the client, but they also lose the administrative costs caused by the chargeback process. All these variables might even cause a significant change to the risk management strategy of the company in general, which sometimes means a complete cut-off of collaborations with a crypto exchange.
Top Reasons for Chargebacks in Credit Card Transactions
Chargebacks are a high operational cost for credit card providers and, unsurprisingly, the number one cause of why users face issues such as my card doesn't work trying to buy crypto. You might ask what causes clients to request chargebacks in the first place. You can find the answer to your question in the section below.
Fraudulent Transactions
In case of an unauthorized purchase using stolen information or a stolen credit card, clients file a complaint requesting an investigation. As stated before, if the truthfulness of the claim is proven, the credit card provider will issue a full refund to the client.
Unauthorized Family Purchases
Chargebacks are common in unauthorized family purchases, especially by children. Such transactions include video games or subscription services that have been purchased without the cardholder’s consent. When the cardholder sees these charges on the statement, which he or she has not recognized, they dispute them as fraudulent. This leads to a chargeback process that not only entails the reversal of financial transactions but also increases the workload and cost of operations of the credit card company.
Misunderstood Subscription Billing
Lack of clarity on subscription billing leads to chargebacks, especially when subscriptions are recurring and not well explained. Customers may not recall that they agreed to pay for recurring charges, or they may not understand the billing cycle and therefore, when they see the charges on their statements, they consider them as unauthorized. This leads to losses from the reversed charges for the credit card company.
Customer Dissatisfaction
Clients can also request a chargeback if they have purchased a service or product that proves to be substandard in quality or in contradiction with the provided description. This increases the merchant’s chargeback ratio and entails the credit card company to spend money on the dispute.
Product or Service Not Delivered
Clients also can request a chargeback if they have purchased a service or product that has not been delivered to them.
Administrative Errors
Mistakes such as duplicate billing or incorrect amounts charged can also cause chargebacks. Proving these errors needs time and a thorough investigation.
Technical Issues
Failures in payment processing systems and errors during online transactions are examples of technical issues that create unintended charges that can cause chargebacks.
Ways Credit Card Companies Prevent Chargebacks
To reduce the risks and negative effects of chargebacks, credit card companies have put in place several strategic measures, which are mentioned in the section below.
Strict Customer Criteria
By creating detailed risk profiles for each business partner and refusing service to those with high-risk profiles, such as crypto exchanges and gambling websites, credit card providers can minimize the risk of fraudulent activities and false chargebacks from infamous and high-risk businesses.
Enhanced Security Measures
Security features like encryption and two-factor authentication reduce the number of unauthorized transactions. These measures increase the security of customer data and lower fraudulent transactions, hence minimizing chargebacks.
Clear Communication of Terms
Encouraging business partners to provide clear terms and conditions for their products and services can lead to lower numbers of disputes over the exact meaning of these terms, which in turn reduces the rates of customer dissatisfaction and chargebacks.
Fees and Penalties
Having expensive penalties discourages business partners from having high rates of chargeback and acts as motivation for improving their customer service, clarifying their item descriptions, and handling disputes internally before getting serious.
Proactive Fraud Monitoring
Credit card providers employ powerful programs that can detect suspicious purchasing patterns, enabling these companies to catch fraud and scams before a chargeback is requested and, in this way, preventing financial losses for both the company and the clients. It also functions as a form of advertisement because enhanced security creates a reliable image for the company.
Customer Education Programs
Educating customers on how transactions occur and what the terms of their purchase mean can help to decrease chargebacks that are caused by the lack of knowledge or understanding. This entails offering tools and information that assist the customers in making better decisions regarding their money.
Characteristics of High-Risk Industries
Based on the factors and characteristics in the section below, credit card companies mark some industries like crypto exchanges as “high-risk,” which leads to these businesses being cut off from credit card services, resulting in problems like my card doesn't work trying to buy crypto.
High Chargeback Rates
Chargeback happens when a customer disputes a transaction, which usually leads to a refund by the payment processor agency. High chargeback rates are common in industries like travel, entertainment, and online shopping. It is usually caused by customer dissatisfaction or the non-delivery of purchased services and is rarely caused by fraud and scams.
Regulatory Compliance Issues
Highly regulated and monitored sectors like cryptocurrency, gambling, health and medicine, and adult services are considered high-risk industries. Compliance with the strict regulations and laws surrounding these industries is often complex and challenging, which increases the potential for legal issues and financial penalties, making these industries very risky for financial institutions and payment processing companies.
Fraudulent Transactions
Industries with enhanced anonymity are naturally vulnerable to fraud, which makes them high-risk industries. This includes sectors like cryptocurrency trading and online gaming, where anonymous transactions are common. Because of this, these areas see a lot of scams and fraud. This can lead to big financial losses for the companies that handle their payments.
Financial Instability
Industries that experience frequent economic shifts can be considered high-risk. These industries heavily change based on market conditions. Profit margins and cash flow are highly unstable in these sectors, which makes them risky for financial institutions.
Reputational Risks
Some Industries are ethically and morally dangerous and can potentially damage a company’s reputation. Sectors like firearms and tobacco fall into this category. Changes in public perception and ethical issues surrounding these industries can change the tendency of financial industries to associate with them.
Legal and Financial Responsibility
Some industries are naturally risky, and their products and services are subject to high levels of financial and legal risks. This includes healthcare and medicine industries, where malpractice or adverse effects of products can lead to serious legal actions and financial issues.
Financial Challenges in High-Risk Industries: Navigating Payment Restrictions
The cryptocurrency industry is not the only sector where issues like my card doesn't work trying to buy crypto happen. Due to the increased fraud rate, high chargeback rates, and strict regulations, high-risk industries face a significant challenge in finding reliable processing payment methods. All of these sectors have their own struggles, and learning about them might give you a better understanding of the current landscape of the cryptocurrency industry.
Casino and Sports Betting
The gambling and sports betting industries are associated with numerous legal issues because these industries have a rather complicated legal framework that is significantly different in various countries. This variability makes payment processing a challenge since they have to deal with different international and regional laws to avoid legal consequences. In addition, these industries are highly vulnerable to fraud because of the nature of their operations; for example, Customers who lose bets may request chargebacks, claiming that they were charged without their consent or they did not understand the terms of betting, resulting in financial loss to payment processing companies.
Adult Entertainment
The adult entertainment industry is generally avoided by traditional financial institutions because of the social shame that is associated with this industry. The legalities of the content produced by this industry also significantly differ from one region to another, which creates more challenges for payment processing companies. High chargeback rates are especially prevalent in this industry because customers can decline the transaction for personal or moral reasons even after receiving the product or content, which negatively impacts the industry’s financial stability and relations with payment processing partners.
Online Gaming
Online gaming platforms are usually regulated by age restriction law, and their failure to prevent children from accessing their platforms can cause severe legal and financial penalties, which makes any financial collaboration risky and complicated. There is also the issue with small transactions that occur frequently, and if the customer feels unsatisfied with the virtual goods they have bought, they can dispute the transaction and get a chargeback. Furthermore, cases of unsupervised children using these platforms to purchase goods usually end in chargeback and legal penalties. Having effective fraud control measures to prevent account hacking, payment fraud, and illegal purchases by minors adds complexity to the payment processing systems.
Tobacco and Vaping Products
Selling tobacco and vaping products requires compliance with a number of health standards and legal requirements, such as age verification, to ensure that the products are not sold to children. These regulations differ from one region to another, making the sale process very challenging. The high level of regulation influences not only the payment processing costs but also the operational costs of compliance since non-compliance with laws results in severe penalties.
Firearms and Weapons
The firearms and ammunition industry is heavily regulated, and businesses need to comply with many regulations, such as background checks before any purchase and detailed record keeping of all sales. Most financial institutions avoid this sector because of the ethical issues and the potential damage to their reputation. Due to the ethical and moral risks of this sector, businesses struggle to find a reliable payment processing service, which often leads them to use a high-risk payment processor. Although these alternatives offer the necessary solutions, they are not without their problems, such as higher processing fees and legal risks.
Resolving Transaction Restrictions for High-Risk Industries
In order to get past the restrictions imposed by companies, you can directly contact your bank or credit card company and ask them the reason why my card doesn't work trying to buy crypto and ask them to remove these restrictions. This direct approach also enables you to personally discuss these restrictions and complicated causes, and after getting informed about the risks and possible fees, you can reach a personal decision based on your own needs and priorities.
When making this request, you should be ready to explain the type of transactions you want to make and give assurances about your comprehension of the risks involved. The bank may ask you to fill in some more papers; for instance, one of the forms you sign guarantees that you understand and agree to bear all the responsibility for possible financial losses and fraud. This form represents your legal recognition of the natural risks in such transactions and discharges the bank from any blame in case of disagreement or fraud.
In addition, the bank may also offer advice or preventative measures such as limiting the number of transactions or some tips about engaging safely in such activities. Going through these steps makes you formally responsible for the related risks, which results in a more flexible relationship with the payment processing provider and gives you greater freedom in managing transactions in high-risk sectors.
Utilizing Bank Transfers with PlasBit for Cryptocurrency Purchases
A simpler way of getting past limitations on buying cryptocurrencies is to make a direct bank transfer to PlasBit. Banks will allow you to make a bank transfer to our exchange, and you can buy crypto from our service. It is, in general, more accessible and safer to make standard bank transfers to registered businesses, even those involved in high-risk activities such as cryptocurrencies. Banks generally view direct bank transfers as less risky compared to credit card payments for crypto purchases, primarily because they involve direct account-to-account transactions that are easier to trace and verify.
Conclusion: Navigating Cryptocurrency Transactions with Financial Institutions
The cryptocurrency industry is widely regarded as a high-risk sector, and characteristics such as instability, regulatory uncertainties, and the potential for fraud further strengthen this image. Resulting in credit card companies restricting or outright banning transactions related to this industry. Such strict measures are used to protect financial institutions from conventional financial risks and any harm to their reputation.
Individuals looking to hold or trade cryptocurrencies should be informed about these restrictions to navigate these challenges effectively. However, there are also alternative options, such as directly contacting banks to lift restrictions or using direct bank transfers to fund accounts in reputable exchanges like PlasBit. These mentioned alternatives provide a safer and more direct method for using crypto exchanges, bypassing the typical barriers imposed by credit card companies.
Ultimately, due to its classification as a high-risk industry, the present landscape of cryptocurrency faces several barriers. However, with informed decision-making and a little bit of research, you can overcome these limitations.
